In August’s Jobs Reports, U.S. Stayed on a Roll; Canada Needs Effort to Find Positive Spin

Sep 04, 2015

The latest three major statistics pertaining to the U.S. labor market are all encouraging.

2015 09 04 US and Canada Employment Graphic

(1) Initial jobless claims for the week ending August 29 were 282,000. While this was an increase of 12,000 from the week before, it was still respectably below the 300,000 benchmark. The weekly number has beaten 300,000 for the past 26 weeks straight, a remarkable run that’s been better than at any time since the early 1970s.

(2) The Bureau of Labor Statistics (BLS) has just reported that the total number of jobs in America rose by 173,000 in August. The average month-to-month gain in U.S. employment through the first two-thirds of this year has been 212,000 jobs. That’s a slightly slower pace of increase (-10.4%) than was achieved through the same first eight months of last year (+237,000).

(3) The BLS is also saying that the national unemployment rate in the U.S. has fallen from 5.3% in July to 5.1% in August. The last time the unemployment rate dipped as low occurred in April, 2008 (5.0%). The number of long-term unemployed (i.e., those out of work for 27 weeks or more) has shrunk by 779,000 over the past 12 months.

Among major industry sub-categories, education and health accounted for the largest jump (+62,000) in workplace positions. Moreover, employment in health-related occupations (+56,000) vastly overwhelmed the academic sphere (+5,000).

The construction of new hospital facilities may have been largely frozen over the past several years, due to uncertainty about many aspects of Obamacare, but employment in the sector now appears to be solidly on the upswing. Hiring at hospitals and nursing homes in August climbed by nearly 20,000 jobs.

Speaking of construction, as a source of net employment increase it remained relatively restrained in the latest month, only +3,000 jobs. But on a year-over-year basis, the sector’s percentage increase, at 3.6%, is ahead of all other major industry groupings. Professional and business services is next, at +3.3%. Then come leisure and hospitality, +3.0%, and transportation and warehousing, also +3.0%.

The construction sector’s unemployment rate in August was 6.1% (not seasonally adjusted, or NSA), which compares quite favorably with 7.7% in August of last year.

Currently, one of the best unemployment rates among industry sub-sectors can be found in financial activities, only 2.5%. That’s an impressive turnaround for a corner of the economy – the banking community – that imploded in 2008 and played a major role in bringing on the Great Recession.  

Manufacturing’s jobless rate now sits at 4.0%, down from 5.0% a year ago. During the month of August, though, the number of production line workers was depleted by 17,000, more than wiping out July’s addition of 12,000.

It’s fun to watch for patterns that emerge in the statistics. After the 62,000-job gain in education and health sector employment, the next three largest increases were all of the same magnitude, +33,000 for each of professional and business services, leisure and hospitality and government.

Leisure and hospitality has been recording good jobs improvement for quite a while now, but a downward shift in the sector’s unemployment rate has been slow to follow. Thankfully, in August there was some decent movement, with the jobless rate dropping to 7.2% from 7.7% in July and 8.1% in August of 2014.

The 33,000-job surge in the public sector was mainly at the local or municipal level, +22,000, with the states contributing to a lesser degree, +9,000, but the federal government hardly budging, +2,000.

What effect have these fairly bright U.S. labor market statistics had on wage rates? According to the latest Employment Situation Report, they remain restrained, sitting generally in the +2.0% to +3.0% range, year-over-year.

In August, average hourly earnings of all American employees engaged in private non-farm work were +2.2%. The figure specifically for construction was a little higher, +2.8%.

Average weekly earnings across the employment spectrum were +2.5%, which was a little better than for construction alone, +2.3%.

Meanwhile, north of the border, based on the latest data from Statistics Canada, it’s becoming harder to put a good face on the national labour market statistics.

In August, total employment in Canada increased modestly, by 12,000 jobs, but the jobless rate worsened to 7.0% from 6.8% in July. The proportion of people out of work is now the same as it was a year ago.

In other words, there has been no improvement in the jobless measure in Canada over the past year, while in the U.S. it has dropped by a full percentage point, as August last year was 6.1%.

The number of jobs in construction in Canada in August fell by 3,000, bringing the year-to-date contraction to 29,000.

Jobs in Canadian manufacturing also retreated by 3,000, but that sector’s year-to-date figure is still up to a minor degree (+5,000).

There is one source of positive spin that can be derived from Statistics Canada’s August Labour Force Survey. The +12,000 net figure resulted from a 43,000 decline in part-time work that was more than counterbalanced by a 55,000 improvement in full-time staffing.

Gains in the latter category, versus the former, are greeted with greater enthusiasm by analysts because they usually imply higher pay and more stability.

Regionally, Saskatchewan (4.7%) has now donned the mantle of Canada’s province with the lowest unemployment rate. Alberta (6.0%) has slipped into second spot, in a tie with British Columbia (also 6.0%).

While Saskatchewan’s dollar-volume energy exports are well below last year’s levels, due to the big drop in the global price of oil, there have been significant victories with respect to some other export product sales, such as in metals and minerals (e.g., potash).

Wrapping up, here’s my usual comparison of year-over-year employment change, the U.S. versus Canada, in four key categories.

As for total employment, the U.S. is currently +2.1% compared with Canada’s +1.1%.

In services, it’s +2.6% for the U.S. as opposed to +1.4% in Canada.

In manufacturing, the U.S. is +1.0% relative to Canada’s +0.5%.

In construction, the gap is the widest, +3.6% for the U.S. but an unfortunate -0.6% for Canada.  

For neither country do the latest labor market statistics demand immediate action from their respective central banks. Soon enough, however, we’ll discover whether or not the Federal Reserve will proceed with the interest rate hike everyone knows is eventually coming.

As for the Bank of Canada, it’s still more likely to cut rates than prod them upwards.

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