Mild Turbulence in U.S. and Canadian Labor Markets

Oct 09, 2015

It’s not rocket science. There are a few key benchmarks to be aware of concerning U.S. and Canadian labor markets.

2015 10 09 Canada Employment Graphic

For the U.S. economy, a net jobs gain of 170,000 in any given month will be viewed as acceptable by most economists, analysts and pundits.

If the figure climbs to 200,000 or higher, their mood will elevate into a range from happy to ecstatic.

Below 170,000, doubts creep in. That’s why the Department of Labor’s September number of +143,000, combined with a downward revision of August’s level to +136,000, was met with such alarm, at first.

Stock markets reacted negatively to the news. But then another train of thought took over.

Given the disappointing job-creation numbers, the Federal Reserve would once again be hesitant about raising interest rates too soon.

Equity investors like their rock-bottom interest rates. As a consequence, the major U.S. stock markets have been on an upward tear over the past week.

Other labor market indicators continue to be quite favorable. The jobless rate, holding steady at 5.1%, is at its lowest point in more than seven years, dating back to before the Great Recession.

Initial jobless claims for the latest week ending October 3 decreased by 13,000 to settle at only 263,000, a commendably low level. The threshold figure of 300,000 has been beaten for 31 weeks in a row.

There’s hasn’t been such a strong performance for initial jobless claims since the 1970s. Taking into account that the labor force was much smaller in that earlier period, the latest long string of low numbers appears even more outstanding.

And yet, there are some news reports that suggest there may be mild turbulence for employment numbers over the next several months.

A number of major U.S. companies − including Walmart, Monsanto and Delta Airlines – have announced layoffs. Most of the staffing reductions have targeted white collar workers at company headquarters.

They have been presented to the media and the public at large as pro-active means to improve profitability. So far, there have been few initiatives to reduce the ranks of front-line workers.

With respect to job vacancies (i.e., the flip side of the labor market ‘coin’), however, there’s one particular opening that may be more important than all others at the moment.

The Speaker of the House, John Boehner, has resigned, but he’s having ‘a devil of a time’ finding someone to take his place. House Majority Leader, Kevin McCarthy, was on the verge of stepping in as Mr. Boehner’s replacement, but then withdrew his application at the last possible moment.

This caught many by surprise. Possible explanations for his sudden back-tracking are being bandied about. All disclaimers to the contrary, there’s a possible mystery that may never be fully revealed. 

Quite a list of recent and current television shows – “Veep”, “Boss”, “Scandal” and “House of Cards” to name just four – trade in political hijinks for their entertainment value.

Gee, I wonder where they get their outlandish plot twists?

Canada’s population is one-ninth the size of America’s. Therefore, the yardstick for good monthly jobs growth north of the border is a little more than one-tenth the U.S. level. That translates to +20,000. 

According to Statistics Canada’s latest Labour Force Survey, the nation added only 12,000 net new jobs in September.  

The average monthly change through the first nine months of this year has been +14,000.

In the latest month, full-time Canadian employment plummeted by 62,000 jobs, while part-time positions rose by 74,000.

Those are big swings. But they don’t appear as dramatic when placed in the context of what occurred in August. The big drop (-62,000) in full-time jobs in September was mainly counterweight to the previous month’s sharp rise (+55,000).

There’s been a similar pattern in the part-time jobs market, with the latest month’s +74,000 serving to partially counterbalance August’s -43,000.

Canada’s unemployment rate in September worsened a notch to 7.1%. In August, it had been 7.0%.

Statistics Canada included a special note at the end of its latest press release saying that if its methodology for calculating the unemployment rate were the same as in the U.S., the current out-of-work figure would be 6.0%.

The U.S. Department of labor is more stringent about who, among those not currently employed, should be counted as really, truly, seriously looking for work.

The construction sector in Canada added 7,000 jobs in September. That still leaves on-site employment down by 23,000 year to date. There is encouragement to be found, however, in the latest housing starts statistic.

According to Canada Mortgage and Housing Corporation (CMHC), new home groundbreakings in September shot up to 230,000 units seasonally adjusted and annualized (SAAR), way above expectations.

Canadian manufacturers in September pretty much held the line on hiring, +1,000 jobs.

The gain in manufacturing employment year to date in Canada −  lower-valued loonie relative to the greenback notwithstanding – has been a miniscule +6,000.

The advantages to be realized from bargain-priced exports, on account of Canada’s weak exchange rate, have been slow to materialize.  

Regionally, the lowest unemployment rate in the country at present is in Saskatchewan (5.1%), with Manitoba (5.2%) barely behind. British Columbia (6.3%) is next best. Alberta (6.5%), where the energy sector has been stymied by fossil fuel prices that are in a deep dark pit, has slipped to worst in the West.

Ontario (6.9%) has a jobless rate that’s ahead of Quebec’s (7.7%).

The current unemployment rates in the Atlantic Region range from a low of 8.8% in New Brunswick to a high of 13.6% in Newfoundland and Labrador. The offshore drilling sector in the latter province, like Alberta, is taking blows from a depressed world oil price.

In a direct comparison of year-over-year percentage changes, the U.S. versus Canada, the former has an advantage in four key categories: total (+2.0% versus +0.9%); the services sector (+2.4% compared with +1.3%); manufacturing (+0.9% relative to +0.2%); and construction (+3.3% next to -0.8%).

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