Image by Mikey G Ottawa via FlickrJeremy Torobin
Ottawa — From Saturday's Globe and Mail Published on Friday, Jul. 09, 2010 7:06AM EDT Last updated on Monday, Jul. 12, 2010 10:37AM EDT
The country’s remarkable rebound from recession gained momentum in June, as surging job growth in Ontario and Quebec underpinned an increase of 93,000 jobs and unemployment fell below 8 per cent for the first time since early 2009, Statistics Canada reported.
Ontario produced 60,000 jobs in June, and Quebec added 30,000, as employment soared in the services sector, including gains in retail, health care, trade and building services.
Importantly, the June jobs report showed the private sector continues to pick up the baton from the public sector, which has long supported the economy with a massive stimulus spending package on the order of $62-billion.
The private sector has accounted for more than 246,000 new jobs over four months, a welcome trend for Canadian policy makers who have long urged companies to take the lead on economic growth as government stimulus spending tapers off in the second half of this year.
The stunning employment gain was close to the highest on record, second only to an increase of about 109,000 jobs two months earlier. The June hiring brought the combined total of new positions created since last July to 403,000, restoring most of the jobs lost during the recession. The jobless rate dropped to 7.9 per cent from 8.1 per cent.
“The jobs picture clearly shows that the Canadian recovery hasn’t stalled yet,” said Benjamin Reitzes, an economist with BMO Capital Markets. “The handoff from public to private spending looks to be going smoothly.”
The jobs report, far stronger than expected, also lays the groundwork for another interest-rate hike later this month, following a quarter-point increase by the Bank of Canada in early June, economists said. The quickly improving jobs picture, along with rising interest rates, stands in sharp contrast with the still-sluggish economy south of the border. Only a fraction of the more than eight million jobs lost in the United
The Canadian dollar soared by nearly a full cent against the U.S. dollar Friday, as investors bet that Bank of
But economists caution that Canada’s economy and job creation are not guaranteed to continue at the current clip.
Since June 1, when Mr. Carney became the first central banker in the Group of Seven to lift borrowing costs, the European debt crisis has produced a march toward austerity in the world’s rich economies, a cure which some analysts warn could prove painful. Also, the recovery in the United States, Canada’s top export market, looks increasingly fragile, as housing and the labour market sputter. And there are fears that measures to keep emerging-market economies such as China’s from overheating could cool a vital source of global demand.
For export-heavy Canada, where the housing market is already slowing down, that means it’s highly unlikely that the current pace of job creation, let alone the first quarter’s 6.1-per-cent economic growth rate, are sustainable.
“Any realistic look at what’s happening in the U.S., Europe, China, suggests that the second half of this year will be much, much weaker than the first half,” Benjamin Tal, deputy chief economist at CIBC World Markets, said. “This recovery is going to be the most nonlinear recovery in ages. The story will not be as pretty three months from now.”
Mr. Carney later this month will release his latest forecasts for Canada and for key countries and regions around the world. Most economists, including Mr. Tal, say things are good enough in Canada for now that the central bank will probably keep raising interest rates in 25-basis-point increments until the benchmark rate is at 1 or 1.25 per cent, but then policy makers will pause to assess how much global headwinds are affecting the domestic economy.
Michael Gregory, a senior economist at BMO Capital Markets in Toronto, on Friday predicted “a pattern of oscillating rate hikes and pauses” as Mr. Carney takes a cautious approach.
Another concern is the type of jobs being created. Retail and other service-sector jobs tend to be more temporary, based on flexible hours, and are often lower-paying, economists said. The goods-producing industries that make many of Canada’s exported products saw a net job loss in June.
Still, Canada’s job gains are far brighter than in the United States, where the jobless rate is still 9.5 per cent and in recent months has dropped only because discouraged job-seekers have stopped looking and thus aren’t counted as part of the labour force.
Mr. Carney started warning in April that Canada's rebound from the crisis would slow considerably starting in the second quarter because of a slowdown in housing, the impact of the loonie near parity with the U.S. dollar and the inevitable end of government support.
Pointing to those factors, plus “uneven” global growth and sovereign-debt worries, Mr. Carney has said several times that a return to more normal interest rates is not “preordained.’’
On Monday, he will release a closely watched survey of executives from across the country, which will give a sense of how worried businesses are about Canada becoming a victim of economic problems from outside its borders.
“I have doubts about whether the economy is going to be able to keep up the head of steam that it has right now,’’ said Carl Weinberg, chief economist with High Frequency Economics in Valhalla, N.Y. “The U.S. economy is questionable, Europe is in trouble, Japan is in trouble, all the major trading partners are hurting and the loonie is quite strong,” he said. “So it’s hard to look at the months ahead and draw a strong line on the chart for where GDP is headed.”
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