U.S. and Canadian Labor Statistics

April 9, 2012

U.S. real GDP grew at identical annualized rates of 2.4% in the second halves of 2010 and 2011.  In between, growth weakened precipitously in the first half of last year to an annualized 0.8% pace because of elevated energy costs, damage to financial markets from the euro debt crisis, and the disruption of supply lines in the wake of Japan’s Sendai earthquake.  While the U.S. economy appears to have performed appreciably better last quarter than in the first quarter of 2011, investors have turned jittery in the early part of April. 

One concern involves the U.S. labor market, which some economists view optimistically while others, like myself, remain pessimistic.  The growth of U.S. employment was surprisingly similar in 1Q11 and 1Q12, averaging 221K per month a year ago and 212K per month last quarterLikewise, non-farm payroll jobs advanced by 180K per month over the six months to March 2011 and 188K per month over the six months through March 2012.  Many optimists stress the faster-than-forecast 1.2 percentage point drop of unemployment to 8.2% in March from 9.4% fifteen months earlier.  Others observe much improved job search prospects for workers who’ve been out of a job only a short while, and some note that the strongest growth in jobs have occurred in relatively high-paying slots that can be counted on to stimulate consumer spending.  Pessimists counter that the level of U.S. jobs grew only 321K on balance in the 11 years between March 2001 and March 2012 and that prospects are poor for eliminating structural unemployment.  Employment in the previous 11 years to March 2001 advanced by 22.9 million workers, by comparison.  An unexpectedly large proportion of baby boomers retired prematurely because of a mismatch in their skills and those that are needed, and America hasn’t found a way to endow enough youth with appropriate skills without also creating a behemoth of student loan debt.

Labor market optimists also cast the jobs deficit in a positive light by redefining what constitutes an acceptable jobless rate as the lowest level that the economy can handle without generating an accelerating rate of price inflation rather than the level that maximizes real economic growth and per capita income growth.  If unemployment is mostly structural and unrelated to deficient aggregate demand, it can be remedied only by regulatory and other reforms, not fiscal or monetary stimulus.  But the dysfunctional political system that now exists renders the advice such a conclusion unusable and the likelihood of a return of economic growth to its prior long-term trend as very slim.   Market participants know this, and the adverse reaction to Friday’s figures was therefore sensible and not overdone.

Canada had more positive March labor market figures to report than did the United States.  Canada has only 13.1% as many workers as America, but the increase of Canadian jobs last month of 82.3K was 68.6% as large as the U.S. increase of 120K.  In addition, Canada’s 7.2% jobless rate was a full percentage point lower than America’s in March, and it had dropped by 0.4 percentage points (ppts) since January versus a U.S. dip of just 0.1 ppt over the same two-month span. 

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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