The jobs keep coming

Employment data for October were released in both Canada and the United States this morning. Despite some uncertainty in the details, the new numbers give little cause for hope that monetary policy tightening will soon be at an end. 

In Canada, employment had been flat to slightly lower each month since May. That pattern of stagnation ended abruptly in October, with Statistics Canada reporting that the economy added 108,000 jobs in the month, versus the reliably risible analysts' expectation of just 10,000. A rise in the participation rate meant that the unemployment rate held steady at 5.2 percent, modestly above the record low 4.9 percent posted in June and July. 

Details of the report were uniformly strong. All of the new jobs created in the month were full-time; the new jobs were spread across the country, with six Provinces posting higher employment and the rest little changed; construction, manufacturing and accommodation were among the sectors posting gains, with retail trade the only significant laggard; and the private sector posted a solid gain of almost 75,000 jobs in the month after several months of small job losses. Year-on-year, both private and public sector employment are up by about 3 percent. 

One aspect of the report that will be of concern to policymakers is the rise in wages. Hourly wages accelerated to a 5.6 percent gain in October from 5.2 percent in September.  Given the widely-reported tightness in the jobs market, this is hardly surprising, and the gain remains more than a full percentage point below headline CPI.  However, even if we are far from the dreaded "wage-price spiral", the Bank of Canada will be watching the trend in wages with some trepidation. 

As for the United States, today's report from the BLS shows that non-farm payrolls rose 261,000 in October -- above market expectations for a rise of 200,000 but lower than the 315,000 jobs added in September. The unemployment rate edged up two ticks to 3.7 percent. So far this year, the average monthly gain in employment has been 404,000, so there is at least some sign that the jobs market may be starting to react to the Fed's policy actions, but from any longer-term perspective the monthly numbers are still strong and the market is indisputably tight. 

On the wage front, the news in the US is perhaps a little more encouraging for policymakers. Average hourly earnings rose 4.7 percent in the year to October, compared to 5.0 percent in September -- both figures are, needless to say, far below the increase in CPI.  It is beyond dispute that wages have almost nothing to do with the inflationary pressures in the US, so the Phillips-curve-based policy approach of combatting inflation by raising interest rates seems unlikely to be effective. That may not be enough to deter the Fed from remaining on its recent course.