Surveys point to much slower employment growth

The sharp fall in hiring intentions in the Bank of Canada’s Business Outlook Survey suggests that the 104,000 surge in employment in December is not a sign of things to come. The survey points to a slowdown in average monthly employment growth to just 10,000 or so. While the weakness of hiring intentions seems somewhat counter-intuitive given still widespread reports of labour shortages, the issue seems to be that firms have lost confidence in the economic outlook. The share of businesses expecting their sales to fall over the next 12 months is now at recessionary levels. We would not rule out a further weakening in hiring intentions in the next quarterly survey, although our view that firms will be more cautious about laying off staff than in the past implies that hours worked will be the more important indicator to watch for weakening labour demand.