The contrast between the Canadian and U.S. June employment numbers highlights a growing reality: About the best thing Canada's economy has going for it is the U.S. economy.
Canada's job count for the month was virtually unchanged from May (officially, an inconsequential 400-job dip), a slap of reality after the giddiness brought on by May's massive 95,000-job surge. For the first six months of the year, Canada averaged monthly job creation of 14,000, a lukewarm pace that was only about half as much as in the prior six months.
The details didn't look any better than the headline number. Full-time employment shrunk by 32,400 jobs, including a 45,000 slump in youth full-time jobs. (Those were replaced with a roughly equal number of part-time positions.) Private-sector employment declined by 5,300.
Lest anyone blame the evaporation of job creation on distortions stemming from the Alberta floods, Statistics Canada was quick to point out that the monthly labour force survey was taken the week of June 9-15, well before the flooding began.
By contrast, U.S. employment rose by a more-than-expected 195,000 jobs. Better still, the April and May job estimates were revised upward by a total of 70,000. Over the past six months, the U.S. economy has created an average of more than 200,000 new jobs a month.
While, predictably, U.S. government austerity measures continued to subtract from employment in June (by a modest 7,000 jobs), the job gains all came from the private sector, which continued its recent hiring spree. Wholesalers and retailers both ramped up their hiring, evidence of the improving outlook for consumer demand.
In sum, the data reflect the improving U.S. economy on the one hand, and the stagnant Canadian economy on the other. But the U.S. improvement is itself good news for Canada, even if it lacks a good-news story in its own data.
As the U.S. economy gains steam, it will provide fuel for a recovery in Canada – an export-heavy economy that sends three-quarters of its exports to the United States. Job growth south of the border will drive demand for goods made to the north; and indeed, the latest numbers may show glimmers of that hope.
One of the few significant pockets of growth in the Canadian jobs report was the country's beleaguered (and export-dependent) manufacturing sector. It added 4,200 jobs in June, its second increase in three months. It's not much for a sector that shed roughly 100,000 jobs in the previous 12 months, but it's a start.
These may represent the seeds of a turnaround, led by the return of U.S. demand.
The key question for financial markets is, what do these numbers imply for central bank monetary policy? Probably not much, frankly. The U.S. jobs data aren't good enough to alter the Federal Reserve Board's thinking, and the Canadian data aren't bad enough to change things for the Bank of Canada.
First to the Fed, whose musings about the inevitable unwinding of its quantitative-easing program (or "tapering," as this process has become known) have been the big obsession for the markets in recent weeks. The Fed's labour-market focus is not so much in job creation, but in minimizing unemployment.
Its monetary policy intentions are joined at the hip to the unemployment rate. And despite the rising job numbers, the unemployment rate didn't move in June – indeed, it hasn't moved in four months.
This was to be expected; a lot of American workers walked away from the work force entirely during the prolonged slump (preferring to return to school, become stay-at-home parents, etc.), and now the return of solid job creation is luring them back.
There are simulataneously more jobs and more people wanting jobs; the unemployment rate is getting no closer to the levels the Fed needs to convince it to start tightening. It will come, with the employment trends clearly headed in the right direction.
But with the labour force participation rate still a couple of percentage points (or roughly 5 million workers) below its pre-recession norms, the return of workers to the work force make the unemployment-rate decline a slow process. That will keep the Fed from accelerating its tapering plans.
The Bank of Canada, meanwhile, needn't be thrown by the apparent stalling of the job market.
Put in the context of what happened in May, a flat number for June is hardly a negative at all. Indeed, many experts thought May's huge job gains were an aberration, a statistical fluke, and/or a flawed survey that generated numbers that were flat-out wrong
They thought that either the job market would reverse some of those unjustifiably large gains, or the June survey would produce more accurate numbers that would be lower than the May finding. It didn't happen; the June numbers indicate the economy held onto the substantial May gains.
As a result, Canada's labour market looks on track – albeit a slower track than its U.S. counterpart. These job numbers, in themselves, won't give the Bank of Canada any cause to re-think its own monetary policy trajectory.