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Canada Employment Number Improves: What Happened to the U.S. Recovering First?

Good news up north; Canada gained jobs for the 2nd straight month. I still do not see all the pundits who clucked that the U.S, would lead the world out of recession with the very deep analysis of "first in! first out!" showing up to say "I'm wrong". Don't hold your breath.

I was actually startled to see how low the Canadian central bank had gone with rates during this crisis, but I suppose they are joined at the hip with the U.S.economy - now we shall see if they will make rumblings to follow Australia's move in raising interest rates in the coming months. Thus far it still seems like a "summer 2010" concept.

Keep in mind as you read the raw numbers, the Canadian economy is 1/10th the size of America's.

Via Bloomberg

  • Canada’s jobless rate unexpectedly fell last month, signaling that the U.S.’s largest trading partner has begun an economic recovery that may lead the central bank to increase interest rates within the next year.
  • Employment rose by 30,600, six times more than forecast, on new jobs in construction and government, Statistics Canada said today. The jobless rate fell to 8.4 percent from 8.7 percent in August.

I am not familiar with Canada's metrics - i.e. is 8.4% really 8.4%? Or is it like America where 8.4% really means 15%. Do they use magic concoctions to add jobs such as the "birth death model" or things of that nature? I don't know.

  • The Canadian dollar and yields on 2-year government bonds rose to their highest levels this year as investors increased bets the Bank of Canada may follow Australia and withdraw some economic stimulus by raising borrowing costs.

  • “The risks of them going sooner rather than later are increasing at the moment,” said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto, adding he still expects the bank will wait until the middle of next year to raise borrowing costs.

  • The central bank lowered its benchmark lending rate to 0.25 percent in April and pledged to keep it there through June 2010 unless the inflation outlook changes materially. The lower rates have eased credit conditions for businesses, and made it cheaper for households to take out loans and purchase homes.

  • Because of Canada’s healthier banks, policy makers have claimed stimulus in Canada will be more effective than in other major economies. None of Canada’s 21 banks has received government funding since credit seized up worldwide in August 2007, prompting government officials and organizations like the International Monetary Fund to predict the country will emerge from the global recession at a faster pace than other major economies.

  • The latest positive data include a 7.2 percent rise in August building permits, a pick-up in factory sales, a larger than expected increase in spending by purchasing managers last month, and a third consecutive monthly increase in home prices, according to the July reading of the Teranet-National Bank price index.

Unfortunately (for them), as we wrote earlier this week Canada is to the US what Australia is to China.

  • “The Bank of Canada is not like the Reserve Bank of Australia,” Derek Holt, an economist at Scotia Capital in Toronto, said in an interview on Bloomberg Television. “The Canadian growth dynamics are very different. We’re much more pointed south to weakness in the U.S. economy."

  • While Canada, like Australia, is a major commodity exporter and is benefiting from rising prices for raw materials, roughly three-quarters of the country’s foreign sales are shipped to the lagging U.S. economy. (lagging? some Bloomber writer is not watching CNBC apparently)

  • A stronger Canadian dollar, which has advanced 17 percent against its U.S. counterpart this year, is also damping demand for exports.

  • “My big concern remains the U.S.,” Prime Minister Stephen Harper said today at a press conference in Welland, Ontario.

Now here is the amusing part - just as China admits much of its recovery is government-driven, so does Canada. But we cannot admit such a thing here - that would a sign of weakness! Remember, we cannot handle the truth.

  • Canadian government officials have sought to damp optimism of a recovery, saying that it is being driven by government stimulus and that private-sector demand remains weak.

  • Canadian federal and provincial governments are injecting C$61 billion in stimulus over two-years to fuel infrastructure spending, boost job benefits and provide tax cuts to households that make home renovations.

  • The public sector, along with manufacturing and construction, led the rise in September employment. Government entities added 36,400 jobs during the month while construction, benefiting from rising home prices and a government stimulus package that targets the industry, added 24,600 jobs during the month.

 


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