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 furtherÂ 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 toÂ 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 (whichÂ 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.