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Job creation in August bodes well for Canada
 
 
September 4, 2009


The last piece of the economic recovery puzzle is falling into place as 
Canada unexpectedly created jobs in August and the bleeding in the U.S. 
job market contiued to slow, figures showed Friday.

�There�s no more positive sign of confidence than when the private 
sector begins to vote with its dollars by adding workers,� said Avery 
Shenfeld, chief economist at CIBC World Markets.

The figures on the labour market -- historically late to emerge from 
recession -- were the latest in a slew of signs, including improved 
retail sales and June economic growth, that point to the end of the 
recession in Canada in the current quarter. In the United States too, 
figures this week showed the manufacturing sector crossing into 
expansion territory, and housing continuing to improve.

The markets reacted positively to the news with Canada�s benchmark 
stock index breaking above the 11,000 for the first time in a month. 
The S&P/TSX composite index rose 95.98 points, or 0.9% to close at 
11,017.47, while the Canadian dollar rose US1.38� to US92.02�. The S&P 
500 was up 13.16 points, or 1.3%, at 1,016.40.

The Canadian economy created 27,000 jobs in August, the first increase 
since the surprise rise in April, Statistics Canada figures showed. The 
improvement was driven by a 31,000 jump in part-time employment, which 
was partly offset by a 3,500 decline in full-time jobs.

The decline in full-time employment reflected continued weak employment 
conditions, but the strong rise in part-time jobs, particularly in the 
private sector, was a positive signal for future job creation.

�Half a loaf, or in this case, half a job, is better than none, so an 
increase in Canadian employment driven by part-time work is still an 
encouraging signpost of an economic recovery now underway,� said Avery 
Shenfeld, the chief economist at CIBC World Markets.

Despite the rise in jobs, an even larger number of people entered the 
workforce to look for work in the month, pushing the unemployment rate 
up by 0.1 percentage point to 8.7%.

The jobs creation in August bodes well for the economy. However, much 
ground needs to be regained before conditions return to normal because 
the number of employed is down by 387,000, or 2.3%, from the peak in 
October 2008. Still, Canadian employment has not been as hard hit as in 
the United States -- the epicentre of the global recession -- which has 
lost 6.9 million jobs, or 3% of its workforce, since its recession 
began in December 2007.

U.S. non-farm payrolls declined by 216,000 in August after a drop of 
247,000 in July, Bureau of Labor Statistics figures showed Friday. This 
pushed the unemployment rate up 0.3 percentage points to 9.7% -- the 
highest rate since 1983. However, the decline was the smallest drop in 
the past year and continued a steady trend of improvement since the 
jaw-dropping drop of 741,000 jobs in January.

St�fane Marion, the chief economist at National Bank Financial, said a 
key detail of the report was that, despite job losses, wages rose for a 
second straight month.

Hourly earnings rose 0.3% in August and were up 2.7% from the previous 
year. The gain was partly helped by a rise in the minimum wage on July 
24.

�This is crucial to keep the economy moving forward since there can be 
no talk of a self-sustaining recovery without a pick-up in income,� Mr. 
Marion said. �The first step to recovery for labour markets always 
starts with an expanding wage bill.�

Canadian wages have remained relatively resilient throughout the 
recession. Hourly earnings rose 0.6% in August after a drop of 0.8% in 
July. Compared to a year earlier, hourly wage growth was at 3.3%, a 
level well above the current pace of inflation despite sitting at a two 
year low.