Canada’s economy shed an unexpected, outsized number of jobs in August for the third consecutive month, another indication that growth is slowing as the Bank of Canada attempts to deliver a soft landing while wrestling exceptionally high inflation down to more normal levels.
Business
Canada’s economy loses 40,000 jobs; unemployment rate jumps to 5.4%
The country lost 40,000 jobs last month while the unemployment rate rose to 5.4 per cent, Statistics Canada reported on Sept. 9.
The consecutive losses over the past three months amount to 114,000, marking the first period in the pandemic of declines unrelated to lockdowns and restrictions. It’s also a phenomenon that historically does not occur outside of a recession, Desjardins head of macro strategy Royce Mendes noted.
“While revisions can always change the picture down the road, the deterioration in the job market appears to be occurring faster than anticipated,” Mendes wrote in a client note.
The declines
The job losses were mostly concentrated in the public sector, particularly education, which lost 50,000 jobs. Some of those drops in schools and educational institutions could reverse when data for September comes out, reflecting the back-to-school season. The public sector has borne the brunt of the jobs decline over the summer, losing 79,000 positions of the 114,000 overall in the past three months. But, it could be overstating broader weakness since it reflects a reversal in the hiring surge during the pandemic, Stephen Brown, senior economist at Capital Economics, said in a note.
Economists pinned the previous declines in June and July on growing retirements and job seasonality, but those arguments “are no longer as convincing,” Brown wrote.
Higher interest rates cooled housing markets almost immediately and building permits declined in July, showing just how sensitive Canada’s real estate sector is to the central bank’s moves. “Higher interest rates mean projects get canceled as developers cannot secure financing and buyers hold back,” Tu Nguyen, economist at accounting and consultancy firm RSM Canada, said.
The increases
The rise in the unemployment rate was the first in seven months and the first that didn’t coincide with pandemic lockdowns or restrictions. In June, the unemployment rate dropped below five per cent to 4.9 per cent, the lowest rate on record, and held steady in July, despite job losses. Employment declines and labour force growth, up by 66,000, contributed to the half-percentage-point increase, which is still in a range that some economists deem as full employment — that is, anyone who wants a job either has it or can get it.
Despite a rise in the unemployment rate, which would naturally lead to a decrease in pay, average hourly wages were up 5.4 per cent last month from August 2021 compared to 5.2 per cent year over year in June and July. That should catch the eye of policymakers at the Bank of Canada, who are trying to prevent high inflation expectations from becoming entrenched in the economy. If people think prices will continue to rise, they will demand raises, which can lead to businesses increasing sticker prices — a cycle governor Tiff Macklem has said he is trying to curb.
The number of hours worked were also unchanged in August, adding to inflationary worries. “The longer term trend in wage growth confirms the impression that the job market remains very tight. Add in poor productivity growth and the combination of the two is disconcerting if the aim is to get the cost of living under control,” Derek Holt, head of capital markets economics at Bank of Nova Scotia, wrote in a note.
Bottom line
August’s data could fuel worries over the economy’s slowing growth and the possibility of a recession. Typically, it can take a few quarters before the effects of higher interest rates are felt throughout the economy, but the jobs report is another signal that it may be happening sooner than expected. Gross domestic product lost momentum in the second quarter, rising 3.3 per cent when policymakers expected four-per-cent growth and economists expected 4.4-per-cent growth, for example.
“There is no debating that conditions are cooling quickly, with the pullback in construction a clear indication that rate hikes are beginning to bite,” Douglas Porter, chief economist at Bank of Montreal, wrote in a note.
“That cooling fits neatly with the view that the Bank of Canada will further moderate the pace of hikes and may indeed be getting close to the peak (we see another 50 bps of total rate hikes from here). However, the steady upward grind in wage growth and the stability in overall hours worked suggest that the bank won’t back down anytime soon,” Porter said.
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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.
The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.
Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.
The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.
Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”
“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.
“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”
Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.
The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.
It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.
Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.
It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.
“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.
Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.
The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.
Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.
The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.
“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.
Asked how long that environment could last, he said that’s out of Telus’ hands.
“What I can control, though, is how we go to market and how we lead with our products,” he said.
“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”
Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.
On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.
That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.
Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”
“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.
“We will continue to monitor developments and will take further action if our codes are not being followed.”
French said any initiative to boost transparency is a step in the right direction.
“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.
“I think everyone looking in the mirror would say there’s room for improvement.”
This report by The Canadian Press was first published Nov. 8, 2024.
Companies in this story: (TSX:T)
CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.
It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.
The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.
Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.
TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.
The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.
This report by The Canadian Press was first published Nov. 7, 2024.
Companies in this story: (TSX:TRP)
The Canadian Press. All rights reserved.
BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.
The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.
On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.
“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.
“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”
Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.
BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.
The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.
BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.
It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.
The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”
Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.
This report by The Canadian Press was first published Nov. 7, 2024.
Companies in this story: (TSX:BCE)
The Canadian Press. All rights reserved.
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