The initial release of the US employment (or jobs, labour, or whatever you want to call it) report came over on Friday this past week. The media and the Wall Street analysts immediately started spinning the US jobs report as a “goldilocks” number as it hit the Wall Street analyst consensus for the Establishment survey, with non-farm payrolls adding 155,000 thousand jobs for the December report. I can’t understand how everyone is happy about a job report “not being too good”, but that’s how things roll on the sell-side. Good is good and bad is even better. More on the US jobs report in a day or two (I’m still going through it).
I went through the Canadian labour report today and surprisingly, there are some good elements to the Canadian job report for December 2012. The top line employment number, which the media and the sell-side analysts focus on came in at a seasonally adjusted 17.666 mln employed. Up about 39,800 jobs, or up about 0.56% from the November 2012 report and about 1.8% from December 2011.
For Canada, where the recent economic data may be indicating even slower growth than the US, it’s a welcome sign that the Canadian economy is not at least falling into the negative growth area. After a poor three month stretch from May to July 2012, where Canada actually lost jobs, the December 2012 report marked the 5th consecutive positive month over month growth in employment. Again, 1.8% year over year job growth is nothing to get exciting about, but it’s evidence that the Canadian economy is probably not in recession at this time. Hopefully Canada will be able to avoid a pending recession assuming the economic performance in the US can pick up.
As with many economic reports in Canada, the official labour report (Labour Force Survey, Canada, December 2012 ,published Jan. 4 2013) is no where as detailed as most US government produced economic reports. You have to go on the CANSIM web site and download the right data set (sometimes the useful data sets require a fee) and manipulate it for yourself if you want to find out and understand what’s going on under the hood.
I find labour reports quite interesting. Though sophisticated in methodology, the labour reports simply present the results/output of a statistical sample model. The inputs (if incorrect or inaccurate) can often produce an output that paints an inaccurate picture of what is really going on at any point in time. The criteria to be considered “employed” in the labour survey sampling process is quite an easy bar in my view. Like most economic data points I study, I’m more interested in the trend (1st derivative) than I am the absolute numbers.
Labor reports also give insight into socioeconomic trends in society. A full-time job added or lost producing or building a high end, net benefit to society product or technology in demand locally and around the world, is not the same as a job added or lost (most likely part-time) at a fast food chain. But in the labour report these very different jobs are counted equally (at least at the top line that everyone focuses on).
Similar to the US, job growth in Canada has been slow by historical standards. Canada is a much smaller population country that the US. 35mln people total, with a labour force of around 19mln vs the US with a civilian labour force of 155.5 mln. For 2012, year over year, seasonally adjusted job growth has ranged from a low of 0.70% (Feb 2012) to the 1.80% year over year growth in December 2012. Surprisingly, this December 2012 job report is one of the better reports for 2012. The average monthly year over year growth for 2012 was just 1.14% (standard deviation of 0.34%).
Notice how job growth in Canada has not been great even going back to the early 2000’s. But Canada did not experience the brutal decline in jobs like the US did during the 2008/2009 recessionary period. In fact on a year over year percentage basis, the recessions in the early 1980’s and in 1990/1991 were a worse time for Canadian workers versus jobs lost in 2008/2009.
Some key highlights I picked up from this December 2012 job report for Canada.
1. The Professional, scientific and technical service industry continues to lose jobs. Declining -5.1% year over year to December 2012. This is not a good trend. These are generally good jobs in a key area that needs to grow if Canada is ever to become a major player on the world scene.
2. Job growth in Canada’s goods producing industries came in at 2.3% year over year vs. the services producing industries at 1.7%. This is typical for the resource based Canadian economy. This is a cultural issue in Canada in my view. People complain, but nothing ever seems to be done. As long as there are resources to sell to other countries, that’s what seems to be the focus.
3. Despite the residential real estate slowdown in at least two of the four major cities in Canada, the Finance, insurance, real estate and leasing industry increased jobs 6.4% year over year. Watch this industry closely going forward as the residential real estate slowdown takes hold in Canada. The big banks employ a lot of people in Canada.
4. Despite having a so called conservative government at the federal level, government jobs at all levels grew 2.6% year over year, faster than private sector job growth. Take away those government jobs added over the last year (92,300) of the total 311,900 jobs added since December 2011 and job growth in Canada looks even worse than the slow growth 1.8% headline growth number indicates.
5. A bright spot in the report shows year over year full time employment growth increased 2.2% from December 2011, while part-time job growth was essentially flat year over year. Sorry to be negative, but if a third of the jobs being added are government jobs, whether the jobs are full-time or not may not matter. I’m not an anti government worker nut, but the size of the public service sector must be limited by the growth (revenues collected) of the private sector. Canada (some parts of the country more than others) has been down this road before, and it is very difficult to fix when it becomes obvious something needs to be done.
6. Employment in the trade industry (mostly retail jobs) of the services-producing sector increased 1.1% year over year, supporting the slow growth observations for the overall Canadian economy. Again, maybe even worse growth than the US economy in recent months.
We’ll see over the next three or four months, similar to the US economy if the Canadian job growth numbers can continue to trend more positive. In a proper, healthy growing economy, some of the negative internals that I’ve identified above should rectify themselves regardless of the 1.5% to 2% slow growth economy(however you measure overall economic growth; usually using GDP).
As we’ve learned with the most recent US residential real estate driven, too low interest rate economic growth cycle. Growth at all costs (aka fake growth) leads to imbalances and the resolution of those imbalances is not pretty. Not to say Canada is the US in 2005/2006, but any honest person needs to admit Canada has problems in residential real estate and consumer debt.
Hopefully, the resolution of real estate driven imbalances in Canada won’t be as drastic as in the US the last 6 years.
Until next time.