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Posted on 03/10/2004 2:38:06 PM PST by Paul Ross
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Numbers raise doubts over strength of economic recovery south of the border
BRUCE LITTLE - ECONOMICS REPORTER
Saturday, January 10, 2004
The red-hot Canadian employment market churned out an eye-popping 53,000 new jobs in December, in stark contrast to the United States, which added an anemic 1,000 bodies to the payrolls, raising doubts about the staying power of the economic recovery there.
The jump in December employment in Canada capped a frenzy of job creation through the latter part of 2003 that outpaced anything seen in more than two decades.
The Statistics Canada report yesterday -- which blew away economists' forecasts -- spurred the dollar to new heights, driving it ever closer to the 80 cent (U.S.) mark, a level last seen in March, 1993. The dollar rocketed up 0.58 cents (U.S.) to 78.67 cents yesterday.
In another sign that the economy remains robust, construction on new homes steamed ahead in 2003, with housing starts hitting a 15-year high, according to Canada Mortgage and Housing Corp.
The blistering pace of job creation in Canada comes amid signs that the U.S. employment market may be softening. Economists had expected more than 100,000 new jobs to be created in December, and the news sent the beleaguered U.S. dollar into another tailspin. A stalled labour market could spell trouble for the election aspirations of President George W. Bush, who is counting on a robust economy to carry him to a second term in November. But, while economists here marvelled over the strength of the Canadian job market yesterday, the Bank of Canada was injecting a note of caution into the outlook.
David Longworth, deputy governor of the Bank of Canada, said in a speech in Toronto that growth in the last three months of 2003 wasn't as strong as the bank had thought.
"Data received up to the end of December suggest that growth may be somewhat lower than we expected, at close to 4 per cent [at an annual rate].'' Despite the strong jobs report, the deputy's comments and the surging dollar have the market still expecting that the central bank will cut rates at the scheduled Jan. 20 interest rate announcement.
But the mixed signals have many observers hedging their bets.
"Over all, the probability of a cut does fall with these [job] numbers," said Royal Bank of Canada economist David Wolf, "but only marginally, not nearly from a 'definitely yes' to a 'definitely no'. The call is still a close one."
The strength of the December labour market surprised analysts. Most of the 53,000 new jobs were full-time positions and the unemployment rate edged down to 7.4 per cent from 7.5 per cent in November, Statistics Canada said.
In the final four months of 2003 alone, the economy pumped out 219,000 new jobs in all. That was more than quadruple the 52,000 that appeared in the first eight months of the year.
While celebrating the gains, many analysts were quick to note another decline in manufacturing employment, where employers have been shedding workers as the stronger dollar cuts into their ability to remain competitive in export markets like the United States.
Since November, 2002, 82,000 factory jobs disappeared as the Canadian dollar climbed by about 22 per cent. Almost all the job losses were in Ontario and Quebec, Statscan said, with most of the downsizing concentrated among manufacturers of computer and electronic products, electrical equipment and appliances.
The fact that factories are bucking the national trend by cutting employment while others hire is a reason for the Bank of Canada to cut interest rates, said CIBC World Markets Inc. economist Avery Shenfeld. "Factory job shedding will spill over into services and consumer demand down the road."
For all of 2003, the 1.7-per-cent rise in total employment fell far short of the stunning 2002 gain of 3.7 per cent, mainly because of the job losses in manufacturing, Statscan said. While the pace of job creation slowed, the mix of new jobs was better. Of the 271,000 new jobs in all of 2003, 90 per cent were full-time, a big improvement on the 62-per-cent share for full-time spots in 2002. One reason might be that public sector hiring was more important to the job market in 2003 -- when it accounted for 39 per cent of all new jobs -- than it was in 2002, when its share of job creation was only 21 per cent.
Bank of Nova Scotia economist Adrienne Warren said total job gains "are bound to slow in 2004. Manufacturers continue to face strong pressures to reduce costs, while federal and provincial government restraint suggests that the public sector will be much less supportive."
While Canada's job machine kept cranking out new positions, however, the U.S. labour market ground to a halt after previously showing signs of revival.
David Rosenberg, Merrill Lynch Inc.'s chief North American economist, noting that Canada created more jobs in the past three months than the United States, despite being a 10th its size, cracked: "Is Canada the new China?"
Despite the economy's respectable jobs gains in the face of a rising dollar and setbacks such as SARS and mad-cow disease, young people -- defined as those under 25 -- had a tough time finding jobs last year. Statscan noted that the number of youths with jobs increased by only 0.6 per cent in 2003, compared with 4.6 per cent in 2002.
NORTH V. SOUTH
Percentage change in total employment in Canada and the United States since Dec., 2000
CANADA
2002: Near record year of job gains
Jan. - Aug., 2003: Economy stalled by SARS, mad-cow disease and the rising dollar
Sept. - Dec., 2003: Biggest four-month increase in 20 years
UNITED STATES
First quarter, 2001: U.S. recession begins
Nov., 2001: GDP begins to recover but job losses continue
July, 2003 onwards: Growth in GDP takes off but still no job creation
SOURCE: THOMSON DATASTREAM; STATISTICS CANADA
-- ECONOMICS REPORTER
© The Globe and Mail. Republished with permission. All Rights Reserved. No part of this article may be reproduced or republished or redistributed without the prior written consent of the copyright holder.
However bad it may be, it certainly isn't that bad.
If the jobs explosion is in government, then it's just more of la grande illusion.
Soars past? Don't hold your breath.
We have a low dollar which is certainly helping, but our trade surplus with The States dropped a bit in the past quater, but it's still at historically normal levels. We're getting some outsourcing business. Housing starts, especially in the Greater Toronto Region, are at record highs and have been for the past 2 years which drives so much other activity. We have a major shortage of construction employees, mainly in Ontario and again, Alberta.
How long this will last is of course anyones's guess. But at the present time things are good.
Short of wierd anomolies, we mirror U.S. economic performance pretty closely. No kidding, if Canada is seeing these numbers it's a good sign for the U.S. as we tend to behave in close correlation.
Hopefully we'll see results below the 49th parallel that will help President Bush in November. I'm confident this will be the case.
Cheers, eh!
Let's dispense with the racial slurs. I am sure we have many Hispanic of Mexican descent on this board. That includes my wife and children.
Cheers!
I feel good about both our economies over the next couple of fiscal years. Unfortunately, employment increases, especially in this era of greater efficiencies driven by Enterprise Wide Systems in larger businesses, is not tracking up as quickly in this recovery as we would expect from past expereiences, is skewing the expectations of many. Still, I'm confident looking at the next two or three years. Hope it happens before Novemeber down there. A Kerry presidency would hurt both of our countries.
Cheers!
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