Canadian employment lags, badly

We've seen this story before, all too many times. After a brief hiatus, the US economy is back to adding jobs at a rapid pace, while Canada's employment market, despite the supposed advantage of a weak exchange rate, is languishing.

Data published today show that the US economy added 287,000 jobs in June, well above expectations. The unemployment rate edged up to 4.9 percent, but only because the participation rate increased, a factor which usually signals rising confidence.  Average hourly wages are up 2.6 percent year-on-year.  Were it not for the increasingly uncertain international situation -- did I read something about a referendum somewhere, or am I imagining that? -- the Fed would be on the point of raising the funds rate again.

Meanwhile in Canada, the employment market was essentially flat in the month, with a loss of 700 jobs, well within the survey's margin of error. The unemployment rate ticked lower, but for the worst possible reason: in contrast to the US, Canadian workers are feeling discouraged about finding jobs, and the participation rate actually slipped as 21,000 people left the workforce.

The falling participation rate is not the only negative feature of the report. The manufacturing sector lost 13,000 jobs in June, bringing the cumulative loss for the past year to 30,000. Bank of Canada Gov. Stephen Poloz had been counting on a "rebalancing" of the economy in response to the weaker exchange rate, reducing reliance on resource exports.  It is surely clear by now that the manufacturing sector will not be a participant in that rebalancing: as I have argued here several times before, most of the manufacturing jobs lost in the past decade are gone for good, regardless of what happens to the exchange rate.

That's not to say that there is no benefit from the weaker dollar. My own region of Niagara, once heavily dependent on manufacturing,  is seeing very healthy tourist arrivals from south of the border again this year, while the number of Canadians doing their weekly shop in the US seems to be falling. Sadly, though, that means highly skilled and well-paid unionized jobs, in the auto sector and elsewhere, are being supplanted by much lower-paying service jobs.

You get the feeling that Governor Poloz knows he's pushing on a string with monetary policy. Earlier this year he basically passed the baton over to the new Federal government, which is looking to boost growth and employment through infrastructure spending. As today's bleak job numbers show, we'd better hope that will work.