02/03/2012 01:47 EST

Why Job Growth In U.S. Is Outpacing Canada


The release of Canadian and U.S. job numbers suggests Canada's economy has stalled, while its American counterpart seems to be gaining momentum.

According to figures released on Friday, the Canadian economy added only 2,300 jobs in January. In comparison, the U.S. added 243,000 jobs, the most since April and May 2010.

One reason for the disparity is simply that the U.S., hit harder by the economic downturn, has more ground to make up than Canada.

"Our economy is at a higher level," Derek Burleton, deputy chief economist at TD Bank, told CBC News. "One would expect the U.S. to grow more quickly than Canada at this stage of the cycle because we have less room for growth."

Canada's unemployment rate is lower than that of the U.S., and the Canadian economy outperformed the U.S during the recession and the early stages of the recovery, he noted.

Canada’s unemployment rate went up 0.1 per cent to 7.6 per cent last month, whereas the U.S. rate dropped to 8.3 per cent — the lowest in three years and the fifth consecutive month that the rate has fallen.

"I think the U.S growing faster than Canada is perfectly natural," Burleton said. He pointed out that the Canadian consumer has been spending like "gangbusters" through the recession and now they’re financially fatigued, whereas the U.S. consumer has pent-up demand.

"I think the U.S. has more ground to make up after the severe recession they've weathered," Burleton added.

However, Canada's reliance on the U.S. economy has lessened in recent years. A third of Canadian GDP used to come from exports to the U.S., but that has dropped to 20 per cent.

"Despite the fact our train is not as closely hitched to the U.S. it still is an integral part of Canada's economic landscape," Burleton said. "So the news south of the border is certainly good from our perspective.

"The U.S. economy's resilience and momentum should help the Canadian job market," he added.

Canada in slow-growth mode

Meanwhile, Burleton said Canada's numbers point to an economy that has been fighting "to keep its head above water."

"Canada’s economy has slipped into slow -growth mode, and the numbers today suggest that this carried forward into the early part of the year," he said.

He cautioned that Canadian employment data has been very volatile on a month to month basis, so one needs to keep things in perspective.

While the biggest growth in jobs has come from the public sector, Burleton said, the biggest source of weakness has been the self employed – which are less stable positions and not the same quality of jobs as those in the private paid sector.

According to Statistics Canada, the sector with the biggest job gains across the country in January was the utilities industry, which includes such things as power generation, natural gas and electricity distribution, sewage treatment and water supply. Utilities saw a 4.8 per cent increase in employment from December 2011 to January 2012, although year-on-year employment was down 4.2 per cent.

The biggest losers across Canada in January were professional, scientific and technical services, where employment dropped by 3.3 per cent, but in terms of longer-term performance this sector was actually up 1.8 per cent year-on-year.

According to the latest numbers from Statistics Canada, teaching is the most sought after yet unavailable job in Canada. For every teaching position open across the country there are 10 people looking.

Between January 2011 and January 2012, the biggest job gains were in the natural resources sector, which includes forestry, fishing, mining, quarrying and oil and gas. That sector saw an 8.5 per cent increase in employment year-on-year and a 1.1 per cent bump from December 2011 to January 2012.

The biggest drop in employment from January 2011 to January 2012 was in the finance, insurance, real estate and leasing sector, where it decreased 4.6 per cent.

Alberta's job market outperformed the rest of the country with the biggest increase in employment year-on-year — 3.9 per cent — followed by P.E.I., which had a 2.4 per cent increase in employment between January 2011 and January 2012. (All figures are seasonally adjusted and do not include the self-employed. StatsCan does not include the territories in this set of job figures.)

Quebec fared the worst: its overall employment level was down 1.1 per cent year-on-year, although it had a modest 0.2 per cent up-tic in employment between December 2011 and January 2012.

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