Canada’s May Employment Performance Bests U.S.

In May, total employment in Canada made a breakthrough that should have received more attention. For the first time in more than four years, the ‘all jobs’ performance north of the border, at +1.8% year over year, beat the U.S. advance of +1.6%, as calculated by the Bureau of Labor Statistics (BLS).

Due to some recent downward revisions in the U.S. data, the two countries tied for total jobs improvement year over year in April (+1.5%), March (+1.5%) and February (+1.6%). Prior to that, however, in every month from January 2017 all the way back to March 2013, the U.S. recorded stronger year-over-year jobs growth than Canada.

The differential reached as high as 1.6 percentage points in December 2014, when the U.S. achieved a +2.2% y/y total jobs gain versus Canada’s +0.6%.

Graph 1 illustrates that the U.S. hasn’t always held the advantage. During the Great Recession, for example, employment in Canada never contracted to anything like the same degree as south of the border.

Canada vs. U.S Employment Statistics

In the latest month, Canada also had the upper hand on the U.S. in year-over-year services-providing jobs (Graph 2), +2.1% versus +1.8%, and in manufacturing (Graph 3), +1.9% versus +0.5% (Graphs 2 and 3).

But with respect to construction employment (Graph 4), it was the other way around, with Canada being flat, 0.0%, and the U.S. +2.9%.

Canada’s nominal jobs gain in May was +55,000, the best monthly increase since last September’s +65,000. The average monthly increase in employment so far this year has been +28,000, a nice hike relative to the +11,000 figure for January through May of 2016.

There was even better news for Canada behind the scenes. The total jobs increase of +55,000 arose from a +77,000 leap in full-time employment, while part-time positions shrank by -22,000.

Analysts are always pleased when it is the full-time segment of the labour market that is doing better.

Full-time jobs offer greater employment stability and they come with higher levels of compensation. They provide employees with the confidence needed to make big expenditure plans. Consumer spending is the primary driver of overall gross domestic product (GDP) growth.

Speaking of GDP, Canada’s ‘real’ (i.e., inflation-adjusted) national output increase in the first quarter of this year was an outstanding +3.7% annualized. The comparable U.S. number was a considerably slower +1.2%.

Canada’s economy is finally emerging from a deep shadow cast by depressed commodities prices. World trade is slowly on the mend and a barrel of crude oil has moved up near $50 USD from $30.

But the mild recovery in some resource markets doesn’t explain all of Canada’s rebound. Graphs 5 and 6 demonstrate that Canada has been catching the high-tech wave. Over the past three years, the curves for Canadian employment with computer systems design services firms and with solely Internet retail sellers have taken on the appearance of rocket launch trajectories.

Canadian Employment in Key Sub-Sectors

While the Federal Reserve has already initiated some small-step (i.e., 0.25 basis points each time, where 100 basis points = 1.00%) interest rate hikes, the assumption has been that the Bank of Canada would remain on the sidelines for quite a while longer. Given the recent sparkle that has begun to appear in the Canadian economy, that perception is undergoing re-appraisal.

Canada’s official unemployment rate, at 6.6%, is till much higher than America’s, at 4.3%. At least half of that discrepancy, however, can be attributed to a Canadian calculation methodology that takes a more relaxed position on who is looking to be hired.

Regionally, three provinces have provided stellar jobs growth over the past 12 months. British Columbia (+99,000) has been the leader, followed by Ontario (+86,000) and Quebec (+83,000).

Quebec’ jobless rate (6.0%) has fallen below Ontario’s (6.5%). One might suppose that B.C.’s unemployment rate (5.6%) would be lowest in the country, but instead that honor goes to Manitoba (5.3%).

Also, in a surprising development, Alberta – which is highly dependent on a battered energy sector – has nevertheless managed to create 41,000 net new jobs over the past year.

To wrap up, Graphs 7 through 12 show employment in a cross-section of Canadian industries.

Despite the gradual improvement in U.S. housing starts, the jobs picture in Canadian ‘forestry and logging’ (Graph 7) has been dim. And now there is the duty on Canadian softwood lumber exports to America to contend with as well.

In the U.S., the uptick in oil prices is already giving some lift to related job site numbers. A similar effect in Canada (Graph 8) is taking longer to materialize.

Since achieving a cyclical peak in late 2014, employment in Canadian aerospace product manufacturing (Graph 9) has been sliding, but ship and boat building (Graph 10) is beginning to pick up some of the slack.

The fact that Canadian architectural and engineering services employment (Graph 11) is tailing off is not encouraging for future ‘hard hat’ field work activity. Projects/structures must be designed before they can be built/erected.

Finally, there does appear to be considerable potential, if one has the training and talent, to work in movies, video and music production (Graph 12). Put on your dancing shoes, tune up your vocal chords and work on the twinkle in your million-dollar smile.