Canadian business confidence is down, according to the latest Canadian Federation of Independent Business.
Despite the national decline, B.C. small and medium enterprises (SMEs) reported increases in both short-term and long-term indices. The long-term index (12 months) rose to 49.8, retracing some of the loss from the previous month. The short-term index (three months) edged up to 48.6 in October, following September’s 48.2 reading. However, this was the second straight month with a long-term reading below 50 since April 2020 and the fourth consecutive month of short-term index below 50 in 2022, as B.C. businesses remained downbeat amidst the barrage of high inflation and interest rates and economic headwinds. Most provinces reported short-term readings below 50 points.
Average capacity use edged down to 75 per cent in October. About 65 per cent of businesses surveyed reported intentions to not change full-time staffing plans, and the number of owners considering themselves in a good state of business health increased slightly (34 per cent). While B.C. SMEs could finally find some relief at gas stations this month, they still had to face the challenges of elevated inflation, labour shortages and concerns around the economic fallout.
Meanwhile, B.C. payroll counts showed modest growth in August as employers continued to hire despite the spectre of a slowing economy and ongoing interest rate hikes. According to the latest Survey of Employment, Payroll and Hours (SEPH), employers added 8,070 positions (up 0.3 per cent) during the month, which marked an acceleration from July. Levels rose 5.2 per cent above pre-pandemic February 2020 which was the strongest rebound among Canada’s largest provinces.
That said, these figures are in advance of a tightening monetary policy stance from the U.S. Fed and the Bank of Canada, which is expected to trigger a sharp slowdown in the economy and potential recession in both countries, alongside weaker global growth expectations.
Findings in the Labour Force Survey point to a flattening of employment trends in recent months, owing to both slower demand and labour supply challenges. Non-farm payrolls are likely to mimic this pattern, but the high job vacancy rate, which was second highest among provinces at 6.1 per cent, will likely lead to adjustments of hours worked rather than reducing staffing during a slowdown.
While conditions have shifted, August data still provides some indication of hiring momentum into the upcoming period of weakness. Services-sector growth drove monthly gains (up 0.4 per cent) as goods- sector hiring nudged lower. Specifically, tourism and return to social events lifted accommodation and foodservices employment by one per cent (or 2,076 positions). Professional/scientific/technical services rose 1.6 per cent (2,929 positions) and real estate gained 1.4 per cent (668 positions). That said, a retreat in both the tech sector and housing market will likely curb hiring. Public-sector employment surged with public administration up two per cent (2,906 positions) and health care/social assistance rising 0.9 per cent or 2,934 positions. Industry offsets included education which fell 4.7 per cent or 8,600 positions and construction (down 0.8 per cent or 1,420 positions).
Wage growth remained robust during the month, with average weekly earnings up 0.7 per cent to $1,107 but a modest 2.4 per cent from a year ago, owing partly to job composition. Fixed weighted average hourly earnings rose 0.3 per cent from July and 3.1 per cent year over year. •
Bryan Yu is chief economist at Central 1 Credit Union.
