Canadians looking to confirm that Americans obliterated our job market… won’t find this morning’s payroll data very helpful. Statistics Canada (Stat Can) data released this morning, shows the country added tens of thousands of payroll jobs in February. That doesn’t quite match the Trade War-obliterated wasteland narrative we’ve been hearing about. Looking at the unadjusted data shows hundreds of thousands of jobs were lost over the same period, which sounds closer to the narrative. Let’s dive into the data and yield insights into what’s happening here.
Canada Added 80k Payroll Jobs, A Multi-Year Record
Canada’s latest payroll data shows February was an exceptionally strong month. Seasonally adjusted data shows payroll employees climbed 0.5% (+79.9k jobs) to 17.4 million in February. The rate made the biggest advance in at least 10 years—an incredible performance, even before considering the macro erosion and trade war. Once those are factored in, it’s downright perplexing how this contrasts with the narrative that everything is going to… well, shit.
Canadian Unadjusted Payroll Data Shows It Lost 370k Jobs
When the narrative doesn’t match the data, it’s time to check the unadjusted data. Ah, there it is! Unadjusted monthly data shows payroll employees contracted by 2.1% (-370k jobs) to 17.1 million in February. At first glance, it appears there’s an overadjustment issue that may hide the economic hit we’ve all heard about in recent months.
Before embracing that idea, it’s worth recalling that unadjusted data is seasonally influenced. A contraction isn’t just normal in February, but the 2.1% drop is smaller than usual. Just last year, the monthly drop came in at a whopping 2.6%, with 2023 (-2.8%) being even larger. The unadjusted data shows this past February was a freakishly good one from a historical perspective.
It still presents the opposite of the political rhetoric and the mainstream media’s economic takes. Maybe the adjustment factor is broken?
Canadian Payroll Data Overseasoned? Narrative Doesn’t Match Data, But What If The Narrative Is Wrong?
Seasonal adjustments smooth out the volatility due to predictable patterns, such as weather and holidays. This typically results in softening the huge growth in summers, and balancing it with the sharp contraction in the winter.
The problem is that a recession isn’t predictable. Neither is the stimulus and monetary policy, which stimulates irregular consumption patterns. This amplifies unusual consumer behavior, such as buying homes in the winter, which leads to… let’s call it overseasoning. The data ends up overseasoned, amplifying the traditional patterns. This overstates the upside, as well as the downside. Whoops.
We warned that this would happen post-recession, as did several experts like the US Federal Reserve. Lo and behold, it did—but is it still? Seasonal adjustments added 1.9% to the unadjusted February payroll numbers, a substantial gap. However, it was smaller than last year (2.0%) and 2023 (2.1%). In fact, it was the smallest in… you guessed it, at least a decade.
What the heck does that mean? The most obvious observation is that payroll job data doesn’t reflect the crisis presented by the tariff war—at least not yet.
Significant negative data points have appeared recently. Home sales are weak, construction is slowing, and auto plants have laid off employees. However, those negative data points don’t appear materially different from prior data. Objectively, the seasonal job losses are smaller than usual. People who don’t usually pay attention to economic data are now suddenly being directed to look at it, and are shocked to discover what happens pretty much every year.
The recent data furthers a point that non-partisan economists have made—Canada’s economic data is surprisingly good. If people weren’t being told to expect an earth-shattering crisis due to falling immigration, an election, and a trade war—most people would be pretty happy.
However, sentiment has collapsed due to a narrative needed by policymakers to divide and conquer, producing economic anxiety amongst households. That negative sentiment and fear is more likely to create the environment households are being urged to fear.
Canadian politicians may have produced the world’s first Schrödinger economy. Politicians are simultaneously taking credit for the strong performance on paper, but also justifying huge rounds of upcoming “emergency” stimulus by claiming that same economy has taken a devastating hit. It’s anyone’s guess whether this is intentionally misleading or they’re genuinely surprised by reality, since many only check in once every 4 years. Perhaps they’re shocked by how low the performance bar was set in prior years.