This won't continue (or, Smoothie King vs. Scotiabank)

North American employment data for December were released today and provided contrasting surprises on both sides of the border.  The US non-farm payrolls report was weaker than expected, while the equivalent Canadian data were way above expectations. The coming months will no doubt bring more surprises, but it seems safe to say that the exact pattern seen in December will not be repeated. 

In the United States, the Labor Department reported that the economy added 199,000 jobs in December, the lowest total for any month of 2021. That was only about half of the number expected by the market, though that consensus may have been biased upward by the outsize 800,000 gain seen in the ADP employment report just a few days ago. However, it's also worth noting that the number of jobs added in November was revised higher by more than 100,000, so today's news is not all bad. The unemployment rate slipped to 3.9 percent, just two ticks above its pre-pandemic level, but total employment in the US remains 3.6 million below its February 2020 level. 

In Canada, the economy added 55,000 jobs in December, twice what the market was expecting. That headline number in some ways understates the strength in the jobs market in the month: there were 68,000 part-time jobs lost in the month, but that was swamped by a gain of 123,000 full-time positions.  The unemployment rate was unchanged at 5.9 percent, still just above its pre-pandemic level of 5.7 percent.

There is one key measure by which the recovery in Canada's job market has far surpassed that in the United States. As noted above, total US employment is still well below its pre-pandemic level. In contrast, while part time employment in Canada is still close to its February 2020 level, full-time employment is 248,000 (or 1.6 percent) higher, thanks to steady gains in recent months. 

Why can we predict that the pattern seen in December unlikely to be repeated?  The answer is the omicron COVID variant. Both December employment surveys were taken before the full impact of omicron was understood, so the data may present a false picture, but the differing outlooks largely reflect the divergent policy responses on each side of the border.

We can illustrate this by looking at the National Basketball Association. Last evening I watched the New Orleans Pelicans playing against the Golden State Warriors at the Smoothie King Centre in NoLa. The seats were packed and the crowd was raucous. By contrast the last home game for the Toronto Raptors, a win over the San Antonio Spurs on Tuesday, was played before an empty house at Scotiabank Arena in Toronto. 

Canada has gone into full panic mode over omicron, with gathering places such as arenas facing strict capacity limits, restaurants and gyms closed and so on. In contrast, the US seems determined to try to ride out micron as much as possible, a decision that has also been taken by the UK government. It remains to be seen who's right here, but there can be little doubt that the divergent approaches will lead to very different employment outcome in January and beyond.