Briefing highlights
- What lurks beneath strong jobs data
- What to expect from Yellen today
- Stocks mixed ahead of Yellen
- New York poised for weaker open
- Canadian dollar above 76.5 cents
- Toshiba takes $6-billion nuclear hit
- PSA in talks to buy GM's Opel
Less work, lagging pay
Beneath Canada’s strong jobs numbers lurk some troubling trends.
There’s no question Friday’s employment report from Statistics Canada was solid: As The Globe and Mail’s Rachelle Younglai reports, we saw 48,000 new jobs in January and a dip in the unemployment rate to 6.8 per cent.
Over the course of 12 months, Canada has now gained 276,000 jobs for an increase of 1.5 per cent.
But hold that thought.
While the country gained full-time jobs in January, they were still outstripped by part-time positions. So in the year to January, the country is up 86,000 full-time jobs and a far stronger 190,000 part-time positions.
Indeed, about one in five jobs in the country are now part-time.
“It’s a concern,” said Arlene Kish, the senior principal economist at IHS Markit Economics in Toronto.
“The share of part-time employment has trended higher since late 2015, increasing a full percentage point, hitting 19.6 per cent in January,” Ms. Kish said earlier in a report.
Then there are the number of hours actually worked, and how fast we’re getting ahead in terms of rising pay.
On the first point, hours worked slipped in January by 0.8 per cent from a year earlier, or the same period in which we saw 276,000 new jobs.
“More bodies working fewer hours seems to be the trend of late, and for quite some time,” said Derek Holt, Bank of Nova Scotia’s head of capital markets economics.
“At some point, employers might slow their pace of adding more bodies and demand more from the existing ones they’ve added,” he added.
Then there’s the issue of pay.
Average hourly wages among permanent workers is up just 1 per cent from a year ago, when not adjusted for inflation, Mr. Holt noted.
“Adjusted for inflation, wages are suffering a slight erosion of purchasing power given headline [consumer price index] inflation of 1.5 per cent,” he said.
“So some combination of people being newly hired at soft or falling wages, and existing employees getting little by way of wage gains, is driving this result.”
There could well be a cost to all this.
“The shift to part-time employment and low wage growth can stretch consumers and further contribute to household imbalances,” Ms. Kish said.
What to watch for today
Key for the markets is the first of two days of testimony from Federal Reserve chair Janet Yellen, this time to the U.S. Senate banking committee.
“Investors are interested in how and to what extent Janet Yellen would bring forward the fiscal uncertainties due to the Trump administration,” said London Capital Group senior market analyst Ipek Ozkardeskaya.
“How concerned is the Federal Reserve (Fed) on the slippery playground and what would be the implication in terms of U.S. monetary policy?” she added.
“Is it time for the Fed doves to fight back the Trump-flavoured rise in the hawks camp, or would the ambiguities keep the trend traders on the buy side of the game? Overall, we expect Janet Yellen to remain muted to avoid any wave of unnecessary panic in the financial markets.”
Markets mixed
Global markets are mixed so far as investors await Ms. Yellen’s comments.
“Fresh record highs in the U.S. yesterday could be the high water mark for the rally if Janet Yellen lets slip anything unnerving in her testimony to the Senate banking committee today,” said IG chief market analyst Chris Beauchamp.
“The breakout in bank stocks yesterday was down to continued expectations of a looser regulatory regime, but if Yellen abandons the script of ‘three hikes in 2017’ some of these gains could be swiftly eroded.”
Tokyo’s Nikkei lost 1.1 per cent, while Hong Kong’s Hang Seng slipped slightly and the Shanghai composite gained marginally.
In Europe, London’s FTSE 100 was up 0.1 per cent by about 5:25 a.m. ET, with the Paris CAC 40 up a touch and Germany’s DAX down 0.1 per cent.
New York futures were up, and the Canadian dollar was above 76.5 cents U.S.
“Although the expectations for an interest rate action in March are very low, investors worldwide are curious about the Fed’s plans to navigate through a potentially ice-cold Trump era,” said London Capital Group’s Ms. Ozkardeskaya.
“It is worth keeping in mind that investors are utterly positive on stocks, while waiting for more details regarding Trump’s crunchy and ‘phenomenal’ corporate tax cut program.”
How markets ended Monday