Following a string of bad news about the Canadian economy in recent months, it appears to be warming up just in time for spring.
Better than expected job figures released in the United States also on Friday – the latest in a series of positive indicators for that country – are fueling what looks to be a sunnier outlook for both economies.
Canada's economy showed signs it may be ready to bust out of a winter funk by churning out a surprisingly strong 50,700 new jobs in February, most of them full-time, in the private sector and in Ontario.
Economists at CIBC called the figure, which blew past expectations, “stunning” given the recent bout of sluggishness many thought the country’s economy had entered into. TD senior economist Sonya Gulati was equally impressed.
“Up until today, economic indicators had suggested that the Canadian economy was sputtering as opposed to accelerating,” she said. “Today's employment numbers put some of these concerns to bed.”
Despite the big gain the unemployment rate held at 7.0. The reason it didn’t decline was that more people were looking for work.
“A flat unemployment rate in February is actually positive - January saw the largest exodus out of the labour force since April 1995. Some of these individuals returned to the labour force in February,” Gulati said.
Regionally, Ontario was the biggest generator of new jobs, adding 35,300, followed by British Columbia with an increase of 19,800. Quebec had the biggest drop in employment, shedding 13,100 jobs.
Economists had expected a second weak month in February given that most indicators have been pointing to modest growth and January saw an outright loss of nearly 22,000 jobs. The forecast had been for about 8,000 new jobs.
Markets are likely to be buoyed by the result, particularly as the economy also got some welcome news on Thursday with a report showing exports had rebounded in January.
Economy watchers will also be encouraged by similarly strong U.S. employment data, released Friday at the same time.
The U.S. Labor Department said the world’s largest economy and Canada’s biggest trading partner added 236,000 new jobs in February pushing the unemployment rate down to 7.7 per cent from 7.9 per cent – its lowest level in more than four years.
The employment gains come amid other signs that the giant U.S. economy is gaining a level of momentum not seen since before the financial crisis of 2008 and subsequent downturn. The housing market, stocks and consumer confidence have aligned and are pointed in one direction – up.
One drag on the U.S. economy could be an estimated $85-billion in federal spending that is being withdrawn from public programs as Washington reins in its budget amid disagreement between Democrats and Republicans about the deficit. Another is a 2 per cent hike in payroll taxes across the country.
Both, however, are expected to be absorbed without derailing what appears to be a solid upward swing.
“[We] expect further cuts in government spending, in large part reflecting the failure to negotiate an alternative to sequester cuts that took effect early in March, will moderate the pace of improvement over the middle of the year,” the Royal Bank of Canada said. “However, underlying strength in private demand and hiring suggests this slowing will ultimately prove temporary.”
In Canada, the details of the Statistics Canada's employment report were almost as strong as the headline number. Most of the new workers were employees, rather than in the weaker self-employment category, in the private sector and full-time jobs beat out part-time positions two to one.
“Almost everyone else seems convinced that the Canadian economy is entering a soft-patch of growth—everyone, that is, except for hiring managers,” CIBC said.
If there was a weak link, it came in the manufacturing, which continued its losing streak of the past few months. The factory sector dropped 25,600 workers in February, putting it in negative territory overall for the past 12 months.
The latest result continues a trend of the labour market outperforming the general drift of the economy, which grew a sluggish 0.7 per cent during in the last half of 2012.
Yet, Statistics Canada said the country has managed to add 336,000 new jobs over the past 12 months, almost all full-time. As well, total hours worked increased by 1.9 per cent.
With files from Canadian Press
©The Canadian Press, 2013