Spurt in jobs likely temporary trend

With Quebec’s robust November job gain of 18,200 jobs, this province is part of a Christmas miracle that spurred a completely unexpected employment surge right across the country.

Nationally, we saw 59,300 new hires last month, pulling down the unemployment rate by two notches to 7.2 per cent. That matches the lowest jobless rate since the recession.

Quebec’s unemployment rate remains higher than the national average, but at 7.6 per cent in November, it too was down, by one tick.

Montreal’s job market looked weaker, although numbers for a single city are less than reliable because the statistical sample is small, so economists take these with a grain of salt. But for what it’s worth, November’s employment report showed Montreal unemployment rising to 8.4 per cent from 8.1, reflecting a small shrinkage in the number of jobs.

The key question, though, is whether the broader uptrend in employment can last.

Unfortunately, the preponderant opinion among analysts is that it probably can’t. That’s not to say that employment will collapse, simply that this is likely the last hurrah for strong job growth until there’s a significant upturn in U.S. prosperity, one that can spur new demand for Canadian exports. That’s expected next year.

In the meantime, the job gains of last month should remain. But they’ll likely be followed by several months of weaker job creation, causing the unemployment rate to stall or maybe drift up a bit.

Of course, this is much the same outlook that economists offered us after a disappointing October job report that showed essentially no growth. That raises an obvious question: If the outlook was already dim and the economy had already slowed to a walking pace, how could we have such a good November?

For Quebec, part of the answer seems clear: a wave of public-sector hiring that began earlier in the autumn. Economist Matthieu Arseneau at National Bank Financial Markets totted up the gains for different industries and found that more than half the jobs created in Quebec during the past four months, a period when employment gains surged, were in sectors with heavy public participation: health care, education and public administration.

Since August, Quebec has enjoyed an average of 20,300 new jobs each month, nearly three times the previous pace.

While this is happy story for as long as this trend can hold up, it’s not likely to continue much longer, suggests Carlos Leitao, chief economist at Laurentian Bank Securities.

A dominant theme in the new Parti Québécois government of Pauline Marois has been the urgent need to squeeze provincial spending, a message driven home by Friday’s announcement of new cuts to the health-care budget for Montreal.

What this means for provincially funded hiring is obvious, Leitao notes. There will very likely be less of it from now on.

There is a positive side to the big picture. If Canada’s employment can hold up this well at a time when two very important drivers of Canadian economic growth — exports and home construction — are in the doldrums, then we have a pretty resilient economy, says Douglas Porter, deputy chief economist at BMO Capital Markets.

Porter is a little worried to see job creation soaring well above the pace of underlying economic growth, since this suggests that each hour of work put in by Canadian workers is producing less and less value — and indeed, this is exactly what new productivity figures show for recent months. But still, a job is a job, and in the short run, it’s good for all of us to have more Canadians with paycheques coming in.

The productivity problemis one that we’ll have to address sooner or later if Canada is to remain competitive in world markets, but it’s possible that this issue will diminish in importance over the coming year. An expected revival of the U.S. economy should support an upturn in this country’s exports. Such an upturn could provide manufacturers with the incentive to invest more in productivity-enhancing equipment.

In the mean time, Porter has a theory about why employment isn’t lagging as much as economic growth. It looks to him as if the relatively high prices that Canada continues to get for our resource products, another big export sector, has maintained a flow of income from abroad that continues to spread through the economy, helping to keep employment afloat.