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April’s Canada and U.S. employment numbers were very strong, maybe

05/06/2011 by Alex Carrick, RCD Canadian Chief Economist

Based on its payroll survey, the U.S. Bureau of Labor Statistics (BLS) is reporting a 244,000 gain in employment in April. This was the highest monthly increase in five years dating back to March 2006.

Furthermore, March and February results were revised upward to show a total of 46,000 more jobs. Therefore, April’s figure incorporated close to 300,000 more jobs than were reported at the end of March.

A note of caution should be added, however. The BLS conducts two surveys each month. Most media attention is showered on the more comprehensive payroll survey. It asks employers about staffing changes.

The smaller household survey is directed at active and potential members of the work force and has the benefit of monitoring self-employment. Its results are used to calculate the unemployment rate.

The household survey in April indicated a decline in employment of 190,000 jobs. Such a large discrepancy between the two series is unusual. The timing of the Easter holiday this year (i.e., later than usual) may have thrown off the seasonality calculation in at least one of the series.

Wonky seasonality may have also played a role in the latest initial jobless claims number that saw an increase of 43,000 between April 23 and April 30. Another factor was job losses resulting from auto plant shutdowns. These were necessitated by parts shortages originating in earthquake and tsunami-damaged Japan.

The drop in employment in the household survey caused the U.S. unemployment rate to rise to 9.0%, up from 8.8% in March.

In Canada, the unemployment rate fell by two percentage points in April to 7.6% from 7.8% in March. The month-to-month change in employment was a very healthy +58,000.

The gain in Canadian service sector jobs was even more impressive at +69,000. Manufacturing employment (-1,000) was essentially flat while the construction jobs total (-5,000) fell.

Total employment in Canada is now more than 100,000 higher than it was before the recession. That’s a remarkable turnaround. Canada’s loss in employment during the recession, from October 2008 to July 2009, was 428,000.

Therefore, since July 2009, a period of less than two years, Canada has increased its employment level by more than half a million (+539,000). Construction has played a big role in that reversal, providing 120,000 jobs, or slightly less than one-quarter of the total.

On a year-over-year basis, Canada’s full-time employment (+1.9%) in April increased faster than part-time (+0.8%) work. It’s a sign of confidence in the economic outlook when employers are willing to take on full-time workers with all that means in terms of benefits and tenure.

It was also the case, however, that public sector employment in April (+2.8% year over year) continued to outpace the private sector (+1.4%).

The death of Osama Bin Laden – and whatever that may mean in terms of Middle East unrest – and tighter monetary policy in Asia and Europe to rein in inflation have caused international oil prices to ease dramatically, back below $100 USD per barrel.

How long the moderation will last and how soon it will be reflected at the gas pump are open questions. If the cost of a fill-up does decline, however, that will be positive for the economy.

The most notable improvement in U.S. employment has occurred in services, +1.7% year over year. Whereas total employment has recovered to only an early 2004 level, the number of service sector jobs has returned to an early 2009 position.

The three service categories that are showing the steepest upward slopes are transportation and warehousing, professional and business services and leisure and hospitality. Also, the education and health sector continues to lay down a base of solidly and steadily growing employment.

In transportation and warehousing, railroad traffic is a bellwether indicator. Take note that Warren Buffett, through Burlington Northern Santa Fe Corp. in the U.S., and Bill Gates through CN Rail in Canada (he now owns more than 10% of it) have invested their money in railroads.

The professional services category includes temporary help-wanted agencies and these have been thriving. Finally, leisure and hospitality have benefitted from a U.S. dollar that has faltered versus most major currencies.

This has been the natural result of investors seeking more risk, rather than simply hiding out in U.S. Treasury Bills, as they did in the worst of the recession. The downgrade in the outlook for America’s Triple-A rating status from stable to negative has also played a role.

The lower-valued U.S. dollar has helped U.S. manufacturers achieve export sales gains (and expand jobs by 1.7% year over year) and it has also been a draw for foreign tourists and business travelers.

Canada: month-to-month total job creation
Canada month-to-month total job creation
Over the past 20 years, the Canadian economy has generated, on average, 17,000 new jobs per month or 200,000 new jobs per year.
Source: Household Survey, Statistics Canada.
Chart: Reed Construction Data - CanaData.
U.S.: month-to-month total job creation
U.S. month-to-month total job creation
Over the past 20 years, the U.S. economy has generated, on average, 100,000 new jobs per month or 1.2 million new jobs per year.
Source: Payroll Survey, U.S. Bureau of Labor Statistics (Department of Labor).
Chart: Reed Construction Data - CanaData.
U.S. employment - per cent change
(based on seasonally adjusted data)
U.S. employment - per cent change
Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor).
Chart: Reed Construction Data - CanaData.

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