January 17, 2012
Canada’s December labour market report encapsulated what’s happening in the economy
Chief Economist, CanaData
Employment in Canada in December reversed the trend of the two previous months as the total number of jobs in the country increased by 18,000, according to Statistics Canada.
The latest gain almost exactly made up for the decline of 19,000 one month previously in November. It was in October when the biggest employment shock occurred with a figure of -54,000. But in turn, that was in counterbalance to September’s +61,000.
In other words, when all is said and done, employment in Canada has been essentially flat since June.
The increase in the total number of jobs in Canada since the low point in the recession (July 2009) has been an impressive +600,000.
The pattern of that recovery has been quite interesting. The first 100,000 came in the second half of 2009. The following year, 2010, accounted for 50% of the overall gain, at +300,000.
The remaining +200,000 came in 2011. But almost all of the increase last year was recorded in the first half.
The bottom line is that the pace of job creation in Canada has slowed markedly.
Throughout last fall, employers were justified in being cautious about their hiring practices. In particular, the European debt crisis caused a great deal of worry that the availability of credit might dry up. That bleak scenario has faded, at least for the moment.
What the December labour market report gives with one hand, it takes away with the other.
For example, while the number of jobs was up, the unemployment rate deteriorated slightly, as more people started looking for work again. The jobless rate rose to 7.5% from 7.4% the month before.
By sector, the entire source of the overall gain in employment in the month was manufacturing, +30,000.
Stronger industrial production in the U.S. has accounted for an improvement in Canadian finished-goods export sales. The easing in the value of the Canadian dollar has also been a help.
At the same time, service sector employment in December stayed flat versus November.
And the number of construction jobs fell by 13,000. C
onstruction’s role as a reliable and growing source of good employment is undergoing some adjustment.
The home starts market, especially in the multi-unit segment, appears set to pull back somewhat after soaring in late-summer and early-fall.
The taps have been turned off on Ottawa’s recession-fighting infrastructure stimulus program.
Another round of spending has not been entirely ruled out, if the economy tanks, but the major thrust of public sector policy at this time is to find ways to save money not spend it.
Many infrastructure projects will still be judged important enough to proceed, in rapid transit for example, but others are now more likely to be postponed for a while.
Also with respect to construction, the recent easing in commodity prices has thrown some doubt on the financial viability of some major resource sector projects.
This is expected to be a relatively temporary phenomenon, but until it is clear that China and its satellites have achieved a soft landing, there will be uncertainty nonetheless.
The apparent slowing of growth in China has not made much of a dent in at least one trend.
Chinese firms are still scouring the world looking to make major investments in key resource sector properties. The goal, of course, is to ensure long-term raw material supplies.
Canada is one of the countries being swept up in this surge of investment.
PetroChina International Investment Co. is close to becoming the sole owner of the MacKay River Oil Sands project in Alberta.
On the subject of Alberta, that province led all others (with the exception of tiny Prince Edward Island) in terms of year-over-year employment growth in December, at +4.9%. By comparison, the Canada-wide gain was +1.2%.
Alberta (4.9%) also had the lowest unemployment rate, although Saskatchewan (5.2%) and Manitoba (5.4%) were respectably close.
Returning to the national scene, the shift to austerity showed up in an 18,000-job decline in the public sector in December.
The job drop on the government side was more than made up by a 35,000 increase in hiring by the private sector.
However, again this wasn’t as positive as it seems on first blush. Part-time employment shot up by 43,000, but the number of better quality full-time positions fell by 25,000.
Canada’s best hopes for an improving economy and better labour markets now rest with the U.S.
South of the border, the December employment numbers were very encouraging. A job gain of 200,000 was recorded, which was higher than most analysts had been expecting.
The jump in U.S. employment was consistent with the declining trend in initial jobless claims that has been evident over the past four months.
Unlike Canada, the U.S. unemployment rate declined in December. While the drop was slight, to 8.5% from November’s 8.6%, the symbolism was significant.
December marked another watershed moment for the two economies. For the first time in five years, the year-over-year percentage change in total employment in the U.S. (+1.3%) exceeded what was recorded in Canada (+1.2%).
If the U.S. labour market continues to improve, this will put quite a different complexion on the Presidential election race.
The Republicans have been counting on a terrible economy and woeful employment prospects to return them to the White House.
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.
