In this week’s The Seven…

• Better, but not out of the woods: Canadian labour market
• Mixed bag: Alberta employment and jobless rate edge lower
• Chill headline, warm core: U.S. inflation
• On the move…to Kalamazoo
• Affordability winds lift Edmonton housing market
• 162 billion reasons…for Albertans to care about the U.S. 
• Next week: Canada’s Productivity Summit!  
• Interesting Fact: The rise of small breweries in Alberta
• Chart of the Week: Trans Mountain Expansion lifts Asia-bound exports

September gain - Canadian labour market surprises

Canada’s labour market showed signs of life last month. Employment rose by 47,000 following four months of little change. This was stronger than consensus and enough to pull the unemployment rate down 0.1 points to 6.5%—the first decline since January.

The composition of last month’s gain was favourable, with full-time and private sector positions driving the increase. Hit hard over the summer months, youth employment largely reversed previous monthly losses. That said, the youth unemployment rate remained well above year-ago levels.

Setting aside the monthly swings, the longer-term trend points to a labour market that has cooled significantly. The unemployment rate is up 0.9 points over the last 12 months and year-over-year job growth has slowed to just 1.5%. Further, even with the jobs pick-up, the employment rate—the share of the 15+ population with a job—continues to decline amid rapid population growth.

Wage pressures are showing some signs of easing. Average hourly wages rose at a slower year-over-year pace of 4.6%—down from 5.0% in August. The Bank of Canada has long said the combo of high wage growth/weak productivity poses an inflation problem and the latest readings should provide the Bank with some comfort.

Bottom line: This is a decent report, but it comes after a string of weak readings. The trend is soft and the employment rate continues to fall. Still, it could tip the scale to the more standard 25-basis point Bank of Canada cut in October. Keep a close eye on next week’s inflation report—the last one before the next rate decision. If we see another cool reading (remember August was 2%), we think a 50-point cut remains on the table. All this does not change our forecast that the policy rate falls to 2.75% by mid next year.

Alberta - Unemployment and employment edge lower

In Alberta, the unemployment rate took a small step back last month as fewer people looked for work. The unemployment rate declined 0.2 points to 7.5% despite employment falling 7,600 (partly reversing August’s 12,800 gain).

The details show that the September employment decline came from part-time and public sector positions.

At the industry level, job losses were concentrated in educational services. The stats are seasonally adjusted, but it could reflect timing effects with the start of the school year (educational services posted increases over the summer).

Curiously, given the ramping up of residential construction and new industrial projects in the province, construction employment has failed to advance in recent months. We look to see those numbers improve. There could be shortages standing in the way, as job vacancies in the industry remain elevated. Oil and gas, forestry and mining employment advanced last month and is now back to 2015 levels alongside the jump in oil production in the province.

Month-to-month changes can be difficult to interpret given seasonal fluctuations (not always picked up by seasonal adjustment factors), small sample sizes and high standard errors. Longer time periods can help.

Over the last 12 months, employment growth in Alberta has been 3% (+73K), roughly double the national percentage gain. Year-to-date, employment is up 3% (vs. 1.7% nationally) with gains concentrated in full-time and private sector jobs.

Bottom Line:  Employment needs to rise faster in Alberta to keep pace with more rapid population growth. In 2024, that has become more difficult for the labour market, and the unemployment rate has crept higher despite job growth outperforming the rest of the country.

Today’s report is consistent with our forecast released last week. We had the unemployment rate staying elevated for the rest of the year, before easing next year on easing population growth. With only three months to go, our forecast of 2.9% employment growth and a 7.1% unemployment rate for 2024 is tracking close to year-to-date actuals of 3% and 7%, respectively. Next year, we expect 2.3% employment growth and an average unemployment rate of 6.8%.

U.S. inflation - Chill headline, warm core

Not terrible, not great. The U.S. annual inflation rate edged down to 2.4% last month. That’s a tad above the 2.3% expected by Wall Street, but still down from 2.5% in August. Inflation hawks will point to a warmer core inflation (excluding food and energy) reading of 3.3%.

After a surprisingly strong jobs report last week, the fear was that inflation would also accelerate—cancelling the Goldilocks no/very soft landing scenario. But hopes are still alive that the U.S. will wrestle inflation to 2% without much of a downturn. Odds are that the Federal Reserve will cut again—this time by 25 basis points—in November.

The U.S. economy has defied expectations. Every time we call for a slowdown, it doesn’t happen. Don’t look now, but the U.S. Federal Reserve Bank of Atlanta’s GDPNow indicator is tracking 3.2% annualized growth for Q3!

With much stronger GDP growth stateside and a 4.1% unemployment rate, Canadians are asking: why are Americans so glum? The University of Michigan Consumer Sentiment Index is well below COVID levels. There are many candidates for the sour mood, but high consumer prices provide perhaps the most compelling explanation.

Chasing affordability...to Kalamazoo

“A-B-C-D-E-F-G-H, I got a gal in Kalamazoo

Don't wanna boast

But I know she's the toast

Of Kalamazoo-zoo-zoo-zoo-zoo”

—”(I've Got a Gal In) Kalamazoo,” Glenn Miller Orchestra 

A recent New York Times article caught my attention. Kalamazoo is a city of over 70,000 in Michigan that is going through a housing boom. Hurt by the 2008 housing collapse, housing prices have come roaring back.

One of the lures of Kalamazoo was cheaper housing (along with the ‘Kalamazoo Promise’ that pays four years of schooling for graduates of public schools).

The article talks about housing affordability playing a more important role in decisions to relocate in the U.S. The California-Texas migration story is similar. Texas has been a recipient of California migrants, with lower housing costs a contributing factor.

Does any of this sound familiar?

Here in Alberta, we’ve seen a similar trend of in-migration with folks drawn to less expensive housing markets. Interprovincial migrants to Alberta have disproportionately come from higher-priced Ontario and B.C.

With Calgary recording explosive population growth, it has seen some of the strongest home price gains in Alberta.

Affordability winds blow north

This brings us to Edmonton, one of the remaining large CMAs with favourable affordability ratios (the composite benchmark resale home price is about 55% of the national average).

Right on cue with our chasing affordability hypothesis, the city has been witnessing a big upswing in sales and prices.

A new report by Royal Lepage indicates that “Inventory remains very tight—among the lowest levels we’ve seen in nearly two decades.”

September sales were up 10% from the same month last year, while the benchmark price rose 7.6%. Yet at around $400K, Edmonton’s benchmark price is still a long way from other major cities with 1 million plus, including Calgary, Montreal, Vancouver and Toronto.

162 billions of reasons to watch the U.S. election

You're giving me a million reasons to let you go

You're giving me a million reasons to quit the show

You're givin' me a million reasons

Give me a million reasons

Giving me a million reasons

About a million reasons

—”A Million Reasons,” Lady Gaga

At the Calgary Economic Development 2025 Economic Outlook conference, my job was to present the outlook.

But I also wanted to tee up former U.S. Ambassador to Canada Bruce Heyman who was talking about the upcoming U.S. election. Here’s a chart I presented on Alberta’s exports to the United States:

Chart of the Week: Canadian oil and gas exports to Asia

It’s been almost six months since the Trans Mountain Expansion (TMX) pipeline reached commercial operations.

In addition to providing much needed takeaway capacity, the benefit of TMX is that it would provide producers access to new markets. Some of the oil is shipped to California, but the barrels are also ending up in Asia.

The pipeline helps reduce the discount on heavy oil, and the volatility of that discount. Past periods of pipeline constraints have resulted in the differential blowing out—like it did in late 2018.

The latest trade data show Canadian oil exports to Asia (excluding the Middle East) have soared since the pipeline entered operations from effectively zero to a monthly average of $325M since May.

We looked at this in two ways: one using the industry definition of exports (oil and gas extraction) and the other the product definition. They tell the same story and the impacts are noticeable.

Answer to the previous trivia question: The name of the agreement that formed the basis of the modern international trade system after World War II is the General Agreement on Tariffs and Trade (GATT).

Today’s trivia question: When was the first brewery founded in what would later become the province of Alberta?