Mediocre job performance is better than the alternative

[ErickMontreal]

Mediocre job performance is better than the alternative

JAY BRYAN, The Gazette

Published: 7 hours ago

 

Canada's job market is in mediocre shape, we discovered yesterday, and when you look at the alternative, this is wonderful news.

 

For the past few weeks, many economic forecasters have been nervously asking themselves if Canada could resist the powerful recessionary undertow from a slumping U.S. economy or whether we'd fall into a downturn similar to the one that's under way south of the border.

 

The final answer might not be available for a little longer, but yesterday's August job reports out of Ottawa and Washington make it clear that, for now, Canada is doing much better than the U.S. and is certainly nowhere near recession.

 

In Canada, employment grew by a solid, if uninspiring, 15,200 jobs, returning to growth after two months of declines. That left the unemployment rate at 6.1 per cent, just above its record low of 5.8 per cent in February. So far this year, the Canadian economy has created 86,900 jobs.

 

In the U.S, by contrast, August proved to be the eighth month in a row of shrinking employment, with 605,000 jobs lost (divide by 10 for a rough equivalence to Canadian numbers) since the beginning of this year.

 

Unemployment south of the border jumped to a five-year high of 6.1 per cent - which sounds low to Canadians, but because of differences in measurement methods, is approximately equivalent to a Canadian unemployment rate of 7.1 per cent.

 

Canada's modestly good job report reinforces the rationale for the Bank of Canada's decision to hold interest rates steady this week. The bank's targeted rate is already quite low at three per cent, and there's no clear need to pump emergency stimulus into the economy.

 

Indeed, one of the the country's weakest sectors in recent years, manufacturing, has shown surprising resilience this year. As of August, factory employment was down by just 14,000, or 0.7 per cent, for this year. That's quite an accomplishment, given the plunge in car purchases by U.S. shoppers, who are the key market for Ontario's giant auto industry.

 

In fact, Ontario has done quite well for a manufacturing province heavily dependent on U.S. customers. So far this year, it has created 51,900 jobs and its unemployment rate has actually edged down to 6.3 per cent from last December's 6.5 per cent, thanks to strong employment in construction and service industries.

 

Ironically, Quebec, another big manufacturing province, hasn't done nearly as well, even though its big aerospace industry is much healthier than the auto industry, helping Quebec's factory sector create some jobs this year.

 

Still, Quebec is one of the few provinces not to have enjoyed overall job growth so far in 2008. In fact, employment has shrunk by 25,200, while the unemployment rate has risen to 7.7 per cent from 7.0 per cent at the end of last year.

 

Montreal's unemployment rate is up just 0.1 per cent so far this year, to 7.3 per cent in August, but this doesn't reflect any better performance than Quebec's on the employment front.

 

The city actually lost 15,700 jobs in the first eight months of the year, but this was mostly offset by the 13,000 workers who abandoned the Montreal job market, making them disappear from the unemployment calculation. They might have found better opportunities elsewhere, gone back to school or simply stopped looking after a tough job search.On the provincial level, Quebec construction employment has been lukewarm and consumer-oriented service industries like retailiing have been shedding jobs, notes economist Sébastien Lavoie at Laurentian Bank Securities. As well, education employment has shrunk in Quebec as it grew in Ontario.

 

Lavoie suggests that Quebec consumers may feeling worried enough to be cutting back on spending, while in Ontario's bigger, more diverse economy, there are still enough areas of growth to offset the auto industry's distress.

 

Nevertheless, Ontario's ability to shrug off the U.S. economy's distress could be living on borrowed time, warns economist Douglas Porter at BMO Capital Markets. There are layoff announcements and factory closings that have yet to go into effect, he notes. And as for Ontario's boom in condo and office construction, "I have to wonder how long it can hang on."