The US non-farm payrolls report for February, released this morning, shows that the economy is continuing to advance strongly. A total of 242,000 jobs were added in the month, well ahead of the consensus expectation of 195,000. The unemployment rate stayed at 4.9 percent, but only because of a welcome rise in the participation rate, which rose to 62.9 percent, its highest level in a year. The only (minor) sign of weakness in the report was an unexpected 0.1 percent fall in earnings, the first time this has happened since 2014.
Needless to say, the Republican Party's response to the data has focused on that last item rather than the positive headline numbers. The Party's fabulously-named national Chairman, Reince Priebus, issues a statement to the effect that the Obama administration was letting down working Americans. Labor Secretary Peres, appearing with the almost-as-fabulously named Wolf Blitzer at lunchtime, had a telling retort. He noted that when Mitt Romney ran against Obama in 2008, he pledged that a Republican administration would get the unemployment rate down to 6 percent -- by the end of 2016. It seems unlikely that anything as boring as facts will play a role come election day, but we live in hope.
Canada's employment data are usually released on the same day as US non-farms, but this month Canada's numbers will be a week behind. However, there was one data release from Ottawa today that suggests the steady improvement in the US economy, combined with the weak exchange rate, is now spilling over into Canada. The headline for Canada's international trade report for January showed that the country's trade deficit rose to $655 million in January from $631 million in the final month of 2015. Looking behind that headline, however, there was plenty of cause for optimism.
Canada's exports rose 1 percent in the month in nominal terms, but consider this: a 2.5 percent decline in export prices (oil again) was more than offset by a 3.6 percent surge in export volumes. All of the growth in exports can be attributed to sales to the United States, which rose 2.6 percent in the month; Canada has a healthy trade surplus with the US, offset by a deficit with the rest of the world.
There's more good news in the StatsCan report. Non-energy exports rose 2.3 percent in January, with strong gains in a number of key categories, including consumer goods, autos and auto parts, and pharmaceuticals. Aircraft exports fell sharply, but only after a strong gain in December. This category may show steadier gains once (if?) Bombardier starts shipping its C-Series jets to airlines in the next few months.
Maybe, just maybe, these data show that the worst may be over for the Canadian economy, which flirted with recession throughout 2015. That's certainly what the foreign exchange market seems to think: the Canadian dollar, which sank as low as 69 cents (US) as little as six weeks ago, today rose above 75 cents (US) for the first time since November. Overall, that's good news for the folks at the Bank of Canada: the C$ is still weak enough to keep non-oil exports competitive, but no longer so weak that it poses a serious threat to the Bank's inflation target. Let's hope Gov. Poloz doesn't throw a spanner in the works with one of his ill-timed musings.
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