OTTAWA — For Canadian job seekers, 2011 is shaping up to be a year in which they envy their American counterparts.
After far outpacing the United States on job creation most of last year, Friday’s numbers for the month of December will likely mark a role reversal, with the U.S. posting the better results for the first time in two years.
And economists say Canadians may have to get used to coming out second best on employment in the upcoming year.
“I think we’ve front-loaded most of our job gains early on in the cycle and now we’re off cycle compared to the U.S.,” says Scotiabank economist Derek Holt.
“I don’t know that we get a resumption of job losses in Canada, but I think the best days for the pace of employment growth are probably behind Canada and ahead for the U.S.”
The consensus among economists is that Friday’s data will show 20,000 new jobs were created in Canada during the last month of 2010, a modest pickup that keeps up with labour market growth.
For the U.S., December’s number is now expected to be the strongest the economy has seen all year and some analysts say a figure topping 300,000 is not out of the question, although the consensus is for a tamer 175,000.
The reason for the optimism is that Wednesday’s sometimes unreliable ADP employment survey suggested the U.S. added a record 297,000 jobs in December, soliciting skepticism — and also crossed fingers it might be right.
Recent economic indicators have been good, particularly in manufacturing and exports, say the optimists. Yes, but not that good, say the skeptics.
“Either we have something on our hands that is much stronger than that or productivity is starting to sag... or, this is B.S. Take your pick,” said David Rosenberg of Gluskin Sheff, making clear he favoured the third option.
But most analysts also point out that the rebound in the U.S. has been long in coming, given that the recession began about a year earlier than in Canada and the labour market is still about seven million jobs shy of pre-slump peaks.
In Canada, by contrast, there are about 20,000 more people employed than prior the recession, although the rebound has not kept pace with the population growth. That is why the unemployment rate is 7.6 per cent, about 1.5 points higher than before the slump.
Also, as Holt points out, the big jump in employment came early in the cycle. The last five months has seen modest, below-trend gains, and on two occasions an outright retreat.
Most economists forecast Canada’s unemployment rate will hover in the mid-seven per cent range this year, with modest job growth of 15,000-20,000 a month that keeps pace with population increases.
CIBC chief economist Avery Shenfeld says Canada’s economy would need to expand by over three per cent for employment to outpace population, and most analysts are projecting growth in the low two-per-cent range. The Bank of Canada’s current forecast is for a 2.3 per cent gain in the country’s gross domestic product.
At the moment, it’s the U.S. economy that is projected to grow in the three per cent range, accounting for growing enthusiasm south of the border that the economy is finally starting to gain traction.
At a news conference Wednesday, newly-appointed junior finance minister Ted Menzies said corporate tax cuts that went into effect on Jan. 1 will help with job creation.
“We are reducing taxes for the job creators in this country,” he said. “There are many people that are still unemployed ... We are trying to create the economy where our job creators, our employers, will be hiring new people.”
Menzies announced an additional $10 million in funding to create about 3,500 student jobs under the Canada Summer Jobs program, which the opposition parties called inadequate.
Another factor that will help, says Bank of Montreal economist Jennifer Lee, is the brightening prospects in the U.S.
A weak link in the Canadian recovery throughout last year has been in the manufacturing sector that exports to the U.S., and growing demand there will be welcomed by producers north of the border.
“Obviously stronger results in the U.S. will be reflected later in Canadian economic growth in general,” she said.
But Holt says the likelihood is that the U.S. will outpace Canada in growth both this year and next, if only slightly. The U.S. economy still has some pent up demand to feed, and is being boosted by government stimulus, while Canada is at cycle peak in housing and consumer spending, he explains. In additional, Canadian governments are withdrawing stimulus.
Yet, Canadians shouldn’t despair too much, Holt adds. In relative terms, Americans may be gaining, but they remain behind.
“It’s a fair point that the U.S. has to catch up with what has already happened in Canada, Australia and other commodity countries,” he explains. “If we slow down but still retain the bulk of the jobs created early on in the recovery, that’s still a good news story.”