Canadian Manufacturing

U.S. outpacing sluggish Canada on jobs growth

Canada's two big growth engines—natural resources and housing—are at the top of their business cycles and have little room to add jobs

OTTAWA—Canadians could be forgiven for turning a little green with envy over the surge in employment south of the border.

After leading the Western world in job creation in the years following the recession—as the Harper Conservative government is fond of reminding the public—the past year has not been good.

The pattern is familiar: on the first Friday of each month, Statistics Canada issues a report showing the economy gained or lost several thousand jobs, making up for the several thousand that were lost or gained the previous month. with one step forward and one step-back, Canada’s labour market has largely stalled over most of the year.

Meanwhile, the U.S. Labor Department tables another strong employment report.

That’s what happened June 6, when Statistics Canada announced the country added 25,800 new jobs in May. Besides being all part-time, the new jobs didn’t make up for the 29,000 lost the previous month.

In the U.S., the jobs numbers went from strength to strength, adding 217,000 in May on top of 282,000 created in April.

It wasn’t an aberration. Even allowing for a work force that is about 10 times the size of Canada’s, the U.S. has been leaving Canada in the dust in terms of job creation for quite some time.

Over the past 12 months, Canada’s economy has added 86,000 new jobs, for a 0.5 per cent increase. The U.S. has added 2.4 million, for a 1.7 per cent increase.

Bank of Montreal senior economist Sal Guatieri says there’s no denying the U.S. is catching up on the jobs front and is likely to keep posting stronger numbers for the rest of the year, or even beyond that.

But that’s where the comparison ends. Even though it may not look like it in the monthly jobs reports, Americans still should be envious of Canada’s labour market, he says.

The upshot is that it took 6.5 years from the start of the recession for the U.S. to win back the 8.7 million jobs it lost.

By comparison Canada recovered all the 430,000 jobs lost during the 2008-09 slump in early 2011, and since has added 600,000 or so more.

Because of population growth, each country has more people to employ than in 2008.

CIBC deputy chief economist Benjamin Tal says that the comparison by this measure is in Canada’s favour.

“Remember, they are starting from an extremely low base. So I don’t think we should envy them,” Tal says. “We didn’t see the same decline in employment they saw. . . . They have much more capacity to grow and much more pent-up capacity.”

Scotiabank economist Derek Holt agrees, but says Canada’s two big growth engines—natural resources and housing—are at the top of their business cycles and have little room to grow.

But the U.S. economy is about to kick it into another gear.

All three Canadian economists agree that there are some positives to the slow jobs growth of late in Canada. Since the economy has continued to expand at about two per cent, it means producers are improving their productivity and becoming more competitive, something U.S. industry did early in the recovery cycle.

Holt adds that Canada may also be fortunate in being pulled along by a strong U.S. recovery in the next year or so, although, of course, it will have to settle for the back seat.

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