Canada and U.S. report job gains in September

The news was even better south of the border — in light of the low expectations. The Labour Department said 103,000 jobs were added last month, and significantly, that there were 100,000 more jobs created in the previous two months than had been reported.

Given the trepidation that preceded the reports, with economists forecasting very moderate gains all attributed to one-time factors, the employment results were like a breath of fresh air.

The September reports were more closely watched than usual for signs of how the job market fared amid financial market turmoil, fears of a European financial meltdown and low consumer confidence.

While not eliminating the possibility of another recession, the fresh data suggest economies on both sides of the border still growing, if modestly, at about two per cent, analysts said Friday.

“What a way to end up a week,” said economist Derek Burleton of the TD Bank.

“Given the high level of anxiety, these numbers should provide some comfort. We were braced for a real downward swing … (but) the numbers in the U.S. and Canada have been holding up generally well.”

The loonie drew early support from the Statistics Canada report and soared even further when the U.S. data was released 90 minutes later, but then settled back to close down 0.05 of a cent at 96.31 cents US amid renewed worries over sovereign debt woes in Europe.

The S&P/TSX composite index finished the day down 191.71 points at 11,588.36 as investors cashed some profits after two days of strong gains that had pushed the TSX up about 600 points.

The better than expected U.S. performance may provide a much-needed boost to confidence, and if sustained, also buoy hopes among Canadian exporters, who ship about 75% of their products south.

Economists had been expecting 15,000 new jobs in Canada and about 50,000 in the United States.

But those expectations came with big asterisks. In Canada, a large cohort of education jobs — mostly rehires from summer layoffs — were expected to distort the data. In fact, the education services added 38,400 employees.

In the U.S., the return of 45,000 striking Verizon workers represented almost half the September gain.

As a result, economists cautioned against over-reacting to the gains.

“Yes we’ll always take an upside over a downside to jobs, but in doing our own job, we can’t exactly be over the moon,” wrote Derek Holt, vice-president of economics at Scotiabank.

Other aspects of the Canadian report showed the underlying softness in the labour market. About 39,000 of the increase was in self-employment, a category the often rises during slumps because workers can’t find regular employment.

In net, private sector employment actually fell by 14,900 and the key manufacturing sector shed 23,500.

“But here’s where the rubber hits the road on the details,” Holt added. “Hours worked fell 0.3%. That’s key since GDP (gross domestic product) equals hours worked times labour productivity such that a decline in hours worked means September GDP already faces downside risk.”

Still, there are positives to be taken from the data, particularly since employment in Canada had been flat the past two months. September’s gain means Canada has averaged 20,000-plus new jobs the past three months, consistent with moderate growth.

Outside of the education hires there were other strengths as well, including in the professional class, scientific and technical services, hotel and food, public administration and particularly natural resources, which gained about 17,000.

Statistics Canada notes that over the past year, the economy has created 294,000 new jobs, most full time and most in the private sector.

In the aggregate, the employment picture likely eliminates any chance that the Bank of Canada will cut interest rates later this month or in December, said Robert Kavcic of BMO Capital Markets. No one is expecting a rate hike any time soon.

Aside from the factory sector, the biggest setback last month was the large 35,000 drop in employment in the finance, insurance, real estate and leasing industries.

Questions still remain about the future, said Burleton. Employers may not have been spooked by the uncertainty and market downturn in early September, when the survey was taken, but they’ve had another month of turmoil to ponder.

“The jobs numbers add confirmation to other signs that Canada’s second quarter GDP was not the start of a recession,” added Avery Shenfeld, chief economist with CIBC World Markets.

“If we are slated for trouble, it will be because of ill winds blowing in from offshore in 2012.”

ther recession may be near at hand.

In Canada, the economy churned out an impressive 61,000 new jobs, all public sector or in self-employment, taking the unemployment rate to the lowest level since December 2008 at 7.1%. The seasonal return of teachers to school added nearly 40,000 jobs.

The news was even better south of the border — in light of the low expectations. The Labour Department said 103,000 jobs were added last month, and significantly, that there were 100,000 more jobs created the previous two months than had been reported.

Given the trepidation that preceded the reports, with economists forecasting very moderate gains all attributed to one-time factors, the employment results were like a breath of fresh air.

The September reports were more closely watched than usual for signs of how the job market fared amid financial market turmoil, fears of a European financial meltdown and low consumer confidence.

While not eliminating the possibility of another recession, the fresh data suggest economies on both sides of the border still growing, if modestly, at about two per cent, analysts said Friday.

“What a way to end up a week,” said economist Derek Burleton of the TD Bank.

“Given the high level of anxiety, these numbers should provide some comfort. We were braced for a real downward swing … (but) the numbers in the U.S. and Canada have been holding up generally well.”

The loonie lifted on the Statistics Canada report, which was released at 7 a.m. ET, and soared further when the U.S. data was released 90 minutes later. It was up 0.63 cents to 96.99 US at mid-morning.

The S&P/TSX composite index was up modestly shortly after it opened, after gaining about 600 points over the last two days, but quickly reversed the gains. By early afternoon, the index was down 125 points at 11,654.81.

The better-than-expected U.S. performance may provide a much-needed boost to confidence, and if sustained, also buoy hopes among Canadian exporters, who ship about 75% of their products south.

Economists had been expecting 15,000 new jobs in Canada and about 50,000 in the United States.

But those expectations came with big asterisks. In Canada, a large cohort of education jobs — mostly rehires from summer layoffs — were expected to distort the data. In fact, the education services added 38,400 employees.

In the U.S., the return of 45,000 striking Verizon workers represented almost half the September gain.

As a result, economists cautioned against over-reacting to the gains.

“Yes we’ll always take an upside over a downside to jobs, but in doing our own job, we can’t exactly be over the moon,” wrote Derek Holt, vice-president of economics at Scotiabank.

Other aspects of the Canadian report showed the underlying softness in the labour market. About 39,000 of the increase was in self-employment, a category the often rises during slumps because workers can’t find regular employment.

In net, private sector employment actually fell by 14,900 and the key manufacturing sector shed 23,500.

“But here’s where the rubber hits the road on the details,” Holt added. “Hours worked fell 0.3%. That’s key since GDP (gross domestic product) equals hours worked times labour productivity such that a decline in hours worked means September GDP already faces downside risk.”

Still, there are positives to be taken from the data, particularly since employment in Canada had been flat the past two months. September’s gain means Canada has averaged 20,000-plus new jobs the past three months, consistent with moderate growth.

Outside of the education hires there were other strengths as well, including in the professional class, scientific and technical services, hotel and food, public administration and particularly natural resources, which gained about 17,000.

Statistics Canada notes that over the past year, the economy has created 294,000 new jobs, most full time and most in the private sector.

In the aggregate, the employment picture likely eliminates any chance that the Bank of Canada will cut interest rates later this month or in December, said Robert Kavcic of BMO Capital Markets. No one is expecting a rate hike any time soon.

Aside from the factory sector, the biggest setback last month was the large 35,000 drop in employment in the finance, insurance, real estate and leasing industries.

Questions still remain about the future, said Burleton. Employers may not have been spooked by the uncertainty and market downturn in early September, when the survey was taken, but they’ve had another month of turmoil to ponder.

“The jobs numbers add confirmation to other signs that Canada’s second quarter GDP was not the start of a recession,” added Avery Shenfeld, chief economist with CIBC World Markets.

“If we are slated for trouble, it will be because of ill winds blowing in from offshore in 2012.”