Canada’s labour market is softening as the unemployment rate rises for a third consecutive month, offering some evidence the economy is finally slowing down.
Statistics Canada reported Friday employment was little changed in July, falling by 6,400 jobs. Meanwhile, the unemployment rate ticked up to 5.5 per cent as the economy struggles to create enough jobs to match the pace of population growth.
The federal agency says job losses last month were led by the construction industry, while the greatest job gains were made in health care and social assistance.
May served as a turning point in the labour market: the unemployment rate rose for the first time in nine months. Prior to that, the unemployment rate was hovering at five per cent, just above the all-time low of 4.9 per cent reached last summer.
As Canada’s population continues to grow rapidly, rising unemployment signals the economy isn’t creating enough jobs to absorb a larger workforce.
“We’ve seen a consistent increase in the number of people without a job in Canada, but people that are still in the labour force,” said James Orlando, TD’s director of economics.
Job vacancies have also declined in the country, offering another sign that the labour market is loosening.
Orlando says high population growth is helping the economy stay afloat as newcomers add to demand. So instead of high interest rates leading to outright job losses, Orlando says the unemployment rate is rising.
“When people come to Canada, even if they don’t get a job right away, they’re consumers, right? They’re looking for housing, they need to buy food, they need to buy clothes. And so they’re buying stuff within the economy. And that is a demand shock,” Orlando said.
“It’s putting a floor under the economy at a time when most people would have thought it would be contracting.”
The Canadian economy has outperformed expectations this year, pushing the Bank of Canada to raise interest rates again in both June and July.
By raising the cost of borrowing for consumers and businesses, the central bank is hoping the economy will slow enough to bring inflation back to its two per cent target.
With the central bank’s key interest rate now sitting at five per cent — the highest it’s been since 2001 — all eyes are on what it chooses to do in September.
Orlando says the economic outlooks suggests the Bank of Canada doesn’t need to raise interest rates again next month.
TD’s updated forecasts suggest the economy will continue to slow, pushing up the unemployment rate to 6.5 per cent in the fourth quarter of 2024.
“Every single day that goes by, more and more people are going to be impacted by the rising cost of housing, specifically on rising mortgage rates, and so it’s going to force a lot of people to adjust their spending habits,” Orlando said.
BMO’s chief economist, Douglas Porter also agrees that the chances of a rate hike in September are falling.
“The soft July employment report is just the latest arrow in the quiver of signs that the economy is losing momentum. Along with the recent friendly CPI result, we believe that the case for the Bank of Canada moving to the sidelines is now very strong,” Porter wrote in a client note.
But with underlying price pressures and wage growth still high, Porter said rates may have to stay high for long.
Inflation in June fell to 2.8 per cent, within the Bank of Canada’s target range of one to three per cent. But core measures of inflation which strip out volatility show prices are still rising quickly and new forecasts from the central bank suggest it expects inflation to get back to two per cent by mid-2025.
The central bank has also raised concerns about the pace of wage growth, noting rapid wage gains would make it challenging to get inflation back to target.
But Orlando says wage growth is a “lagging indicator,” meaning workers are getting wage increases to reflect the rapid rise of inflation that already occurred. But falling job vacancies and rising unemployment suggest high wage growth won’t persist.
“These are the best indicators that you’re not going to get keep wages growing at this five per cent level going forward or into perpetuity, they’re going to ease based on the fact that the labour market is clearly loosening,” Orlando said.
A quick look at Canada’s July employment (numbers from the previous month in brackets):
Unemployment rate: 5.5 per cent (5.4)
Employment rate: 62.0 per cent (62.2)
Participation rate: 65.6 per cent (65.7)
Number unemployed: 1,166,800 (1,147,100)
Number working: 20,166,400 (20,172,800)
Youth (15-24 years) unemployment rate: 10.2 per cent (11.5)
Men (25 plus) unemployment rate: 4.6 per cent (4.4)
Women (25 plus) unemployment rate: 4.8 per cent (4.4)
Here’s a quick glance at unemployment rates for July, by province:
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
