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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.
There really is no valid comparison. Canada didn't take the same hit after the dot com bust and we aren't in the same position vis a vis outsourcing that the U.S. is. Numbers in the States look good and I have confidence they'll continue to improve over the short and medium term. The U.S. economy is far more resiliant and fundamentally strong than the Canuck economy. You are far more diverse and innovative than we are, and that gives you the chance to gain greater ground faster than we can in good times. America isn't burdened by the huge statist element we have to deal with. We are also far more unionized and don't have right to work laws; this consistently works to our disadvantage, although our weak dollar does mitigate the impact somewhat. Recall as well that even in the lowest tax jurisdictions we enjoy we are still above U.S. levels in most cases. You have significant advantages in a strong economy, and that's a good thing for America.
Bingo. Not to mention that he wears thin very quickly. The more Americans see of him the less they'll like him, IMHO. He doesn't seem able to connect with the average person the way Clinton could, even if that was truly phoney as well. The man doesn't seem to have any polish, and that's required to hide arrogance.
I'm still calling Bush at 53% popular vote in November. More if Kerry blows up on the campaign trail. Probably not a Reagan landslide, but bigger than anyone's predicting at this point. I don't think 40 states is beyond the possible.
So was Clinton's in 1992. I truly hope, and believe, that Americans will see through it. But then, I couldn't believe that folks bought into Clinton's deception back then.
Then again, as a Canadian, it's not like I have anything to say about this from a superior point of view :-)
My hopes are with President Bush. We need him, all of us, all who care about freedom and progress against the forces of evil, and those forces are very real.
Cheers!
Any rate, not to say he should, but if GWB had instituted a massive armed forces draft as did FDR, Truman, and LBJ, we could show great 'job growth' due to that artifical stimulus as well.
Personally, I believe GWB should not be afraid to 'Jawbone' the 'Bigs' into NOT firing people. Reagan wasn't. Just make sure they don't do anything until after November 3rd, 04. As Rush Limbaugh has observed, we know that RAT corporate honchos and bureaucrats will do everything they can to increase societal pain...i.e., unemployment (witness Teresa Kerry's outsourcing mania)... that they can. So we need to muzzle and whip the Free Traitors into line.
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