Disappointing Job Market Performance in November in both Canada and the United States

On the face of it, the headline of the Statistics Canada labour market report for November sounded great: Unemployment dropped 0.3 percentage points to 7.6 % and is now at its lowest level since January 2009. But a closer look reveals that there is less substance behind this number than meets the eye. And those who were hoping that the numbers from South of the border would look better were bitterly disappointed as well.

The biggest problem is that the drop in Canada’s unemployment was not due to strengthening in the job market. Sure, 15,000 jobs were created in Canada, but on its own, this would have produced a much smaller improvement than the 0.3% recorded. The main reason for the drop in unemployment was that unemployed people – primarily youth – continued to give up looking for work. This is a continuation of a trend that we pointed out last week as well. And when people are not looking for work, they are not counted as unemployed in Statistics Canada’s reports.

The second problem is that the fact that on balance 15,000 new jobs were created actually masks a problem with the quality and sustainability of those jobs: All of these new jobs – and then some – were part-time, as the number of full-time jobs actually declined. And almost all of the new jobs were in the public sector – while the private sector saw no increase. Based on historic experience, at this stage of an economic recovery (a year or so after the recession officially ended), the job market should be well on its way to recovery with solid full-time employment growth in the private sector.

This is not happening this time.

To be sure, employment has actually risen by 318,000 (+1.9%) since November 2009. But almost all of these gains happened in the first half of 2010. Since the summer, job growth has almost stalled. And even the growth that has been recorded has been in part-time jobs. Since last year, part-time employment grew by 4.0% (+127,000), a faster pace than the 1.4% growth in full time (+192,000).

The third major problem is that most of service industry sectors that saw some gains in November historically either haven’t been producing very well paying jobs, or require a high degree of specialization (those were health care, social assistance, retail and wholesale trade and accommodation and food services). Jobs in the industries that usually pay better declined – including jobs in manufacturing, finance, insurance, real estate and leasing.

Another concerning fact from the Statistics Canada report is the decline in the labour market participation rate among youth (15 to 24 years old). The participation rate measures the percentage of all youth who are either employed or looking for work. It dropped to 63.2% in November – and this is the lowest since August 1999. If young people are not looking for work because they are choosing to go back to school and improve their employability, this may not be a bad thing. But there is no data showing the reasons why youth are not looking for work.

One bright spot in Statistics Canada’s report was the fact that Ontario recorded a notable increase in employment. Many of the net declines occurred in Quebec and Manitoba. The other provinces showed little change.

More specifically, Ontario’s saw gains of 31,000 in November. As a result, Ontario’s unemployment rate dropped to 8.2%. This is the lowest since 2009. At the same time, the number of workers in Ontario grew by 2.1% (+140,000) from a year ago.

The not-so-good news here is that the employment gains recorded in November are very much the product of the higher hiring demand that Vicinity Jobs reported in the third quarter of 2010. Hiring demand receded to earlier levels again in October and November – so the job growth is unlikely to continue. One positive trend that we did see in November, however, is that hiring demand in the traditionally well paying Professional, Scientific, and Technical services increased.

Employment in British Columbia largely remained unchanged in November, and the unemployment rate was 6.9%.

Employment for youths aged 15 to 24 was unchanged but less young people were looking for work than before. As a result the youth unemployment rate dropped 1.4 percentage points to 13.6%.

Some of the more interesting numbers from Statistic Canada’s report:

  • Jobs in the recession-proof health care and social assistance industry rose by 28,000 in November. Since this time last year this industry has seen gains of 120,000 (+6.1%) one of the highest rates of growth of all industries.
  • Employment in wholesale and retail trade rose by 26,000. Employment in this industry is up 57,000 (+2.2%) compared to a year ago.
  • Accommodation and food service sector jobs increased as well.
  • Jobs in the manufacturing sector continued to decline (as they have been since long before the recession started). Manufacturing jobs fell by 29,000 in November bringing their totals to 1.73 million, or 47,000 (-2.6%) below the levels from this time last year. Their share of total employment continued on a downward trend, reaching 10% in November.
  • The finance, insurance, real estate and leasing industries shed 23,000 jobs in November. Levels are down 43,000 (-3.8%) since last year. This trend is unlikely to change soon, given that Canada’s major banks also reported disappointing financial performance earlier this week.
  • Construction has been on an upward trend for more than a year with gains of 89,000 (+7.5%). Their growth was the second fastest of all sectors behind natural resources (+7.9%).

The job market data for the United States from November was released today as well, and it arguably paints an even grimmer picture than Canada’s job numbers. On balance, less than 40,000 jobs were created in the United States in November – in spite of earlier reports from private companies that had lead Economists to believe that more than 150,000 would have been created. This affects Canada as well, because the US is a major market for Canadian businesses and while it continues to underperform, many Canadian employers will be unable to expand as well.

The full version of Statistics Canada’s report can be found at this link:

http://www.statcan.gc.ca/daily-quotidien/101203/dq101203a-eng.htm