News: Job gains beat expectations

Ontario, Saskatchewan help Canada create 15,000 jobs

By Jamie Sturgeon, Financial Post | 09. 05. 2008 (see article)

Two provinces helped the Canadian labour market add 15,000 new jobs in August and gain back some ground from July's steep decline, Statistics Canada said on Friday.

Saskatchewan and Ontario both added jobs in the month and partially offset losses in Nova Scotia and Manitoba, while "employment was virtually unchanged in the other provinces," the federal agency said.

The unemployment rate remained unchanged as well, at 6.1%.

The uptick was higher than many economists had forecast. Most called for a net addition of about 10,000 jobs in August after a decline of 55,000 jobs in July -- the sharpest one-month fall since February 1991.

"While not exactly a picture of robust health, the decent August job gain helps to relieve some of the sting from July's big drop," said BMO economist Doug Porter in a morning commentary.

It didn't lessen the sting of another plunge in employment in the United States, however.

The news comes as nonfarm payroll figures in the U.S. revealed that the world's largest economy shed 84,000 jobs last month.

"These results do not take away from the fact that Canada's labour market is cooling, but it certainly is not deteriorating at nearly the pace the U.S. job market is softening," Mr. Porter said.

Job gains at home in August, which could play into fall federal election campaigns, were led by a broad range of sectors.

"In August, employment increased in educational services, construction, utilities, and accommodation and food services," StatsCan said. "These gains were partially offset by decreases in health care and social assistance, agriculture and public administration."

Manufacturing managed a modest recovery in August, picking up 13,800 additional jobs across the country. The education and construction sectors had the biggest pop in new jobs, however. About 30,000 jobs were added in education.

The construction labour market grew by 7.4% or 19,000 jobs, "continuing the strength seen over the past few years," StatsCan said. Most increases took place in Ontario, British Columbia and Alberta.

The higher-than-expected job growth provided some evidence that July's plunge was an "overstatement" of weakness in the economy, according to Paul Ferley, assistant chief economist with RBC Economics.

"It also reinforces the Bank of Canada's contention ... that though the domestic economy has slowed it still remains strong," he said in a note to clients.

The central bank held its benchmark interest rate at 3% this week after stating Canada's economy was in better shape than most for the time being.

With the looming possibility of a federal election this fall that could hinge on the state of the economy, August's employment figures "took on a bit more importance," Mr. Porter said. "But the main theme is that it is a bit better than expected."

Following two months of heavy losses Ontario, a critical electoral battle ground, saw net-job additions jump by 14,000.

Still, increases in construction and several service industries were dampened by the year-long decline in manufacturing in the province, StatsCan said.

Saskatchewan added 6,000 jobs in the month, mainly in mining, oil-and-gas production and construction.

While Quebec's employment was little changed in the month, Canada's second-most populous province saw unemployment increase to 7.7% as more people entered the labour force looking for work, StatsCan said.

On the downside, the agricultural labour market retracted by almost 18,000 jobs, while health care and social assistance saw more than 21,000 jobs disappear.

Both Nova Scotia and Manitoba shed about 4,000 jobs in August.

In total, employment has increased by just 0.5% or 87,000 new jobs this year compared with the 1.3% or 221,000 jobs added through the first eight months of 2007.

"We take one-month numbers with a grain of salt given the huge standard error associated with a survey of this size," said Avery Shenfeld, economist with CIBC World Markets.

The scale of the rebound could be due to a statistical overestimate of the decline in July the CIBC economist said, given that each monthly result is only accurate to within 55,000, 19 times in 20.

"The broader picture is that Canadian employment gains since the start of the year have been soft," Mr. Shenfield said.