January 18, 2010
Economy at a Glance | Jan. 19, 2010
December labour market reports in U.S. and Canada take wind out of economies’ sails
ALEX CARRICK
Chief Economist, CanaData
Everybody sit down, breathe deeply and try to relax. The December labour market reports in both the U.S. and Canada are disheartening.
The U.S. reported 85,000 jobs lost in the latest month and the figure in Canada was a reduction in employment of 3,000. Both countries’ unemployment rates stayed high and flat: 10.0% south of the 49th parallel and 8.5% north of it.
One of the ironies of the latest batch of numbers is that the November month-to-month employment change in the U.S. has been revised to +4,000. While this may not be statistically significant, in that it could just as easily have gone the other way, it still does mark the first time employment has increased month to month in that market since December 2007, two years ago.
The latest numbers highlight what can happen at the end of a recession. Rehiring former workers and taking on new labour lags general economic activity levels. Some firms genuinely have to keep reducing staff because their business sectors are still showing little or no improvement. Others use the recession as a smokescreen to reassess and reorder their priorities, selling off and otherwise disposing of properties that no longer fit their overall corporate objectives or are judged as having little prospect of making long-range profitability targets.
In the U.S., total employment has decelerated but is not yet on a level plane. Despite the drop in value of the greenback in world currency markets, the total number of manufacturing jobs continues to slide, although motor vehicle and parts employment has been flat since early summer. Construction jobs remain in decline, but it is interesting to note that architectural and engineering services employment is on a slight upward trend. This leads job-site work levels.
Canada lost 130,000 construction jobs from October 2008 to July 2009. Over the past five months, however, 50,000 jobs in construction have been recovered. Some of this is due to government stimulus spending showing up on job sites and some is due to a resumption of homebuilding activity as a fallout of hot resale markets and bargain mortgage rates.
Canada has been fortunate in not having a year-over-year decline in service sector employment. The figure has hovered around 0.0% for the past 12 months, but compare that with a U.S. number that dropped to almost -3.0% in the summer and now stands at -1.6%. Service sector jobs have taken over in the U.S. and Canada as the prime sources of employment. Manufacturing jobs in Canada (-9.8% year over year) now stand at almost exactly the same position as in the U.S. (-9.9%). The soaring loonie is an inhibiting factor for export sales and this is with commodity prices only slightly on the mend. Watch out if oil moves up to $100 USD per barrel.
There is a silver lining in the U.S. and Canadian December employment reports. Government budgetary deficits, improving retail sales, inflation replacing deflation, stock market indices forging ahead, and some commodity prices moving upward have been suggesting economies perhaps recovering faster than expected. Some warnings have been issued that central bankers should be initiating tougher monetary policy. Given the latest labour market statistics, there seems little danger that record low interest rates will be raised, at least through this year’s first quarter.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog. His lifestyle blog is at www.alexcarrick.com
Data source: Household Survey, Statistics Canada/Table: Reed Construction Data – CanaData.
