Today’s Job Numbers
Today’s job numbers are surprisingly strong given the alarming deterioration of the US economy. They are very likely to lead to a further rise in the dollar, a reluctance on the part of the Bank of Canada to cut interest rates any further in the near future, and even a quick election. But we should not lose sight of the fact that we need to plan for worse times ahead.
January was clearly a strong month – the unemployment rate fell to 5.8%, and there was a big jump in employment, led by full time private sector jobs. Conditions improved even in Ontario and Quebec, and manufacturing employment even increased slightly (amidst, it must be said, news of large pending layoffs.)
This is all good news, but it must be put in the context of very weak private sector job growth over the past year (up by just 0.7%) and the loss of 113,000 manufacturing jobs over the same period. The high dollar and soaring manufacturing trade deficit with Asia will continue to drive job losses, and the auto and forestry sectors in particular will continue to be hard hit by the US downturn (which is now clearly turning into a recession.)
Despite the good news, the Bank of Canada should continue to cut interest rates to take some steam out of the dollar, and Mr. Flaherty’s pending Budget must aid industrial adjustment and boost investments in public, environmental and social infrastructure.
“Is it just my imagination”, a song title that keeps running through my head when I read the labour report for last month. With the headline grabbing layoffs/plant closures that have been flooding the corporate announcements over the past few months, one is hard pressed to conclude that these numbers are trend setting. It will be interesting to see what happens with payrolls when SEPH comes out. I find these numbers as a bit of an anomaly given the sustained trend towards declining private sector jobs. However, a majority of the job layoffs and plant closures were merely announcements and most will not actually occur till later this year and next.
I think yesterday’s Martinrea announcement underline exactly this paradox. Friday the Canadian economic world gets giddy with the positive jobs report and then Monday the reality of the world sets back in with another plant closure announcement.
Again we could see another major asset obliterated from the Canadian economic value chain because of a artificially high dollar as it’s “Dutch disease” tentacles rampage across the landscape. Not to worry though, we have Steve and the boys on the hill and eventually we’ll have a 50 cent dollar again. However, it’ll be in about 5 years and we will not have an Autosector, or a forestry sector, and a much smaller economic base to pay the bills.
Yet where do we find the labour leaders these days. Too busy fighting amongst themselves over past scars and new gashes like the Magna/CAW deal. Quite sad really. One contract based on a new direction (mind you within a concessionary environment) standing out and gathering all the attention and focuses on one large union facing its most difficult challenge in its long history. To hear the kind of divisive rhetoric coming from various sources is pathetic. It would be nice to see some of the larger public sector unions get off there high horse and focus on helping the industrial unions get their footing established, rather than pushing them off the cliff. And it would be nice to see a concerted response from the industrial unions and take on the political powers. We need to have an economic summit amongst labour/business and government to come up with a more focused economic plan to deal with the industrial meltdown that is occurring in Ontario and Quebec. If the federal level is not willing to do its part, maybe the Ontario and Quebec should get together and hold a summit without the feds.
paul
I put up a post on labour market slack which I think points in the direction of an argument for a much more subtle and nuanced approach to fiscal and monetary policy at this time and over the short term.
I do not think that a one size fits all interest rate is going to do much except harm at this point. It is both the geographic and sectoral disequilibrium character of accumulation at this time which is the problem. Low interest rates and a general, across the board tax reductions will serve to exacerbate the problem.
See:
http://rppe.wordpress.com/2008/02/12/labour-market-slack-and-stagnation/