7 November 2008

Canada adds 9,500 jobs, defies expectations

The following is excerpted from the 7 November 2008 edition of “globeandmail.com”.

The Canadian economy defied expectations and added 9,500 new jobs in October, which some economists called an impressive result that augured well for income growth while others wondered how long Canada's employment levels could be sustained.

Statistics Canada said Friday that, although overall employment levels increased, the unemployment rate climbed to 6.2 per cent in October from 6.1 per cent in September because of an increase in the number of people looking for work.

Economists had expected losses. Employment levels were propped up by large gains in public administration jobs, with an increase of 40,000 positions, mostly related to hiring for the federal election in October…

Still, [Bank of Montreal economist Douglas Porter] said, “landing deep in the heart of October's financial market turmoil, the stability in Canada's latest jobs survey is impressive, even if the numbers were bolstered by election-related hiring.

“After all, this modest gain follows a record rise in the prior month. If there was any lingering doubt that Canada's economy is faring better than the U.S. – so far – this two-month performance should quash it.”

U.S. job cuts, reported later in the morning, were massive and deeper than had been expected.

U.S. employers cut payrolls by 240,000 jobs in October, increasing the unemployment rate to 6.5 per cent from 6.1 per cent.

This “cross-over” put the U.S. jobless rate ahead of Canada's for the first time since the early 1980s, Mr. Porter noted.

In Canada, Statistics Canada reported that an increase in full-time work was mostly offset by a decline in part-time work.

“The labour market surprises once again,” said Toronto-Dominion Bank economist Charmaine Buskas, noting that the addition of 47,500 full-time jobs “bodes well for income growth.”

On the goods-producing side of the economy, however, there was broad-based weakness, Ms. Buskas noted.

The number of jobs in Alberta increased by 15,000, pushing the province's employment rate to a record high of 72.5 per cent. However, British Columbia lost 8,300 jobs in October and saw its unemployment rate increase to 5.3 per cent. There was little change in the employment levels in other provinces.

Royal Bank of Canada economist Paul Ferley noted that the strength in October's employment report was narrowly based in the public sector.

“Goods-producing jobs fell 27,000 in the month, led by construction and manufacturing, which each lost 9,000 jobs. Within the service-producing component, the weakness was led by a 27,000 drop in employment in accommodation and services,” Mr. Ferley said in a research note.

The weakness in these sectors “is more consistent with the pressures confronting the Canadian economy, including the high costs of capital that has already likely sent the U.S. economy into a recession,” Mr. Ferley said.

Ms. Buskas also wondered how long Canadian employment levels would hold up.

“The report was better than expected, though it simply delays the inevitable and much of the strength comes from a one-off factor, which was the election,” Ms. Buskas said.

“We still expect that the Canadian labour market will be retrenching going forward in response to cooling U.S. demand for Canadian goods and slowing in domestic economic conditions.”

Bank of Nova Scotia economists Karen Cordes and Derek Holt said … “So far, Canadian employment has behaved in a typical pre-recession manner. We think Canada is now verging upon a ne