JOB GROWTH SHIFTS, BUT NO MATCH FOR U.S.
Interest rates in Canada remain in holding pattern
• The focus of Canada’s employment picture is shifting back to previously strong job- creating provinces, such as Ontario and Quebec, with the outlook for a recovery in resources- dependent parts of the country — mainly in the West — still likely many years away.
That divergence is also evident between Canada and the United States, with growth in the U. S. economy and labour force gaining enough traction to warrant a long- delayed rise in the Federal Reserve’s key lending level.
Interest rates in Canada, by contrast, remain in a holding pattern as the economy struggles to avoid another dip into recession as the country continues its readjustment from energy-fuelled growth to other industries.
The direction of the Bank of Canada’s next move will depend on the timing and pace of that shift. Governor Stephen Poloz will announce the bank’s latest rate decision on Jan. 20.
“Just as we see divergence in economic performance between countries in response to lower resource prices, so, too, we see di- vergence within Canada, among our different sectors and geographic regions,” Poloz said in Thursday in a speech in Ottawa.
Canada’s economy had been showing signs of recovery last year, following a recession in the first two quarters.
However, growing global economic uncertainty — and the ongoing impact of the collapse in oil prices — has weakened in the country’s recovery, despite the Bank of Canada cutting interest rate twice in 2015, to the current level of 0.5 per cent.
The U. S. Fed, meanwhile, began raising its trendsetting lending level last month — from near zero to between 0.25 and 0.5 per cent and marking the first increase in nearly 10 years.
“Divergence of monet- ary policy should be expected,” Poloz said in his speech. Canada ended 2015 with total net job growth of 158,100, which works out to an annual increase of 0.9 per cent, Statistics Canada reported Friday. That was slightly better than annual increases of about 0.7 per cent in both 2013 and 2014.
Although net job creation came in at nearly 23,000 in December — ahead of economists’ estimates of a 10,000 gain and good enough to keep t he unemployment rate at 7.1 per cent — the pace of growth remains disappointing, especially when compared to a jobless rate a year ago of 6.6 per cent.
“It wasn’t as rosy as the 23,000 headline,” said Robert Kavcic, senior economist at BMO Capital Markets. “(But) there’s not been a huge decline in Canadian jobs, just a big shift from where those jobs are coming from.”
The end- year provincial employment figures show the contrast between prime resources- dependent regions and more diversified areas. Jobs in British Columbia were up 2.3 per cent in 2015, with Ontario and Quebec both growing 1.2 per cent, while employment was down 1.8 per cent in New- foundland and Labrador and Alberta declined 0.6 per cent, while Saskatchewan’s labour force was flat.
“You’re seeing job growth in those three ( non- energy heavy) provinces head and shoulders above the rest of the country, and the three oil- producing provinces at the very low end of the spectrum,” BMO’s Kavcic said.
Meanwhile, the U. S . Labor Department reported Friday that its economy created 292,000 jobs in December, beating forecasts and lifting the overall 2015 gain to 2.65 million. The unemployment rate was unchanged at five per cent, a seven-year low.
“The United States is leading the global economy as weakness in China, Russia, Brazil and other emerging economies is driving down commodity prices and stock markets,” said Sherry Cooper, chief economist at Dominion Lending Centres.
“The U. S . December jobs report confirmed the strength in the economy as payroll growth surged, capping the second- best year for American workers since 1999.”