Canada’s Labour Market Catches a Summer Cold from the U.S.

Canada lost 9,000 jobs in July, Statistics Canada recently reported. That was after six months of solid back-to-back increases totaling over 300,000 new jobs in the first half of this year.

Relative to most other countries, Canadians have had little to complain about on the jobs front.

From October 2008 to July 2009, Canada lost 400,000 jobs in the recession. These have all since been recovered. The U.S. lost 8.4 million jobs from December 2007 to December 2009. Some progress has been made in reducing that shortfall this year, but the current level of employment in the U.S. is still 7.7 million below what it was before the abrupt change in job prospects.

In September 2008, just before the stock market crashed and the recession began in Canada, employment in construction peaked at 1.250 million. Nine months later, Canada’s construction jobs level was down to 1.130 million (-120,000). Over the past year, there has been a steady climb back up to 1.224 million, or almost a complete recovery of jobs lost during the recession.

Year-over-year employment in construction in Canada is now +8.6%. In the U.S., the comparable figure is -6.3%. While that figure certainly looks bad, it is actually a considerable improvement versus the -17.4% year-over-year performance for the U.S. in September 2009.

Construction employment in Canada has been saved by two factors. First, after a hiccup in housing starts early last year, they returned to surprisingly high levels late last year and so far this year. They may not be sustainable and the question is to what degree they will moderate.

Second, government infrastructure work has been compensating for the disappearance of private sector investment. Since federally-backed government projects must be finished by March 31, 2011, new starts initiated by the public sector will fall off in this year’s second half, but on-site work will be accelerated to meet the deadline for ensuring Ottawa’s portion of the funding.

After falling for more than five years, manufacturing employment in Canada has been flat since July 2009. The biggest plus for manufacturing has been the overall improvement in the auto sector versus the crisis conditions of a year ago, when GM and Chrysler became insolvent.

On the downside, the present position of Canada’s loonie near parity with the greenback presents an obstacle to export sales. Even more significant has been the weak state of U.S. demand in general, after the initial surge of stimulus-induced spending. Ongoing weakness in jobs creation south of the border is creating a sinkhole along the U.S. recovery path, raising the possibility of a double-dip recession. Also, U.S. residential real estate needs to shake loose from its lethargy.

There was a significant drop in full-time employment in Canada (-139,000) in July that was almost made up by an increase in part-time work (+130,000). Regionally, B.C. (+16,300) and Alberta (+8,800) were the provinces with the largest gains in employment in the latest month. Quebec (-20,900) saw a significant drop in its employment level, as did Ontario (-15,000).

A notable regional divide still exists. All four provinces in Western Canada have lower unemployment rates than the six provinces from the Manitoba-Ontario border moving east. Saskatchewan’s jobless rate (5.1%) is the nation’s lowest, followed by Manitoba (5.6%).

Newfoundland has the loftiest unemployment rate (15.0%). Quotas in the fisheries are the cause. However, the province also has the nation’s second-highest year-over-year gain in employment (+3.3%), due to alternative prospects in other sectors, including energy, mining and construction.

Canada: month to month total job creation

*Over the past 20 years, the Canadian economy has generated, on average, 17,000 new jobs per month or 200,000 new jobs per year  Souce: Household survey, Statistics Canada  Chart: Reed Construction Data – CanaData

Canada vs. U.S. monthly unemployment rate (per cent)
Seasonally adjusted data

Data sources (seasonally adjusted): Statistics Canada and U.S. Bureau of Labor Statistics (Department of Labor)

Chart: Reed Construction Data – CanaData

Change in total employment – Canada vs. U.S.

*“Year over year” is the monthly figure versus the same month if the previous year

Data sources (seasonally adjusted): Statistics Canada and U.S. Bureau of Labor Statistics (Department of Labor)

Chart: Reed Construction Data – CanaData

Change in service sector employment – Canada vs. U.S.

*“Year over year” is the monthly figure versus the same month if the previous year

Data sources (seasonally adjusted): Statistics Canada and U.S. Bureau of Labor Statistics (Department of Labor)

Chart: Reed Construction Data – CanaData

Change in construction employment – Canada vs. U.S.

*“Year over year” is the monthly figure versus the same month if the previous year

Data sources (seasonally adjusted): Statistics Canada and U.S. Bureau of Labor Statistics (Department of Labor)

Chart: Reed Construction Data – CanaData

Change in manufacturing employment – Canada vs. U.S.

*“Year over year” is the monthly figure versus the same month if the previous year

Data sources (seasonally adjusted): Statistics Canada and U.S. Bureau of Labor Statistics (Department of Labor)

Chart: Reed Construction Data – CanaData

Change in full-time vs. part-time employment in Canada

*“Year over year” is the monthly figure versus the same month if the previous year

Data sources (seasonally adjusted): Statistics Canada  Chart: Reed Construction Data – CanaData

Change in private sector vs. public sector employment in Canada

*“Year over year” is the monthly figure versus the same month if the previous year

Data sources (seasonally adjusted): Statistics Canada  Chart: Reed Construction Data – CanaData

SOURCE: 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

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