U.S. and Canadian Trade and Labor Market Trends

May 11, 2012

Canada’s labor market continues to outperform its southern neighbor’s.  U.S. non-farm payroll employment climbed only 134.5K per month in March-April, roughly half the 271.5 monthly rate of increase in January-February.  The U.S. April jobless and participation rates were 8.1% and 63.6%, and people working represented 58.4% of the country’s population.  Average hourly earnings were 1.8% higher than in April 2011.  In Canada, by comparison, a 70.25K per month increase of employment in March-April was the biggest two-month advance since January-February of 1981 and analogous to a 534K per month pace in the considerably larger U.S. labor market.  Canada’s jobless rate last month matched the 0.1 percentage point dip of the U.S. rate to stay 0.8 percentage points lower than the U.S. level at 7.3%.  Canadian hourly earnings climbed 2.4% over the past twelve months, and the 66.6% participation rate was 3.0 percentage points higher than in the United States.  61.9% of Canada’s population were working.

Canada enjoyed a C$ 2.627 billion trade surplus in the first quarter of 2012, three-fourths of which occurred in January.  The surplus was 30% smaller than in the final quarter of 2011 but 122% larger than the surplus in the first quarter of 2011.  Exports and imports posted on-year growth of 8.6% and 7.4%, respectively.  In March, however, both exports and imports were marginally smaller than in February.  Whereas the U.S. imports more energy than it exports,  Canada is a significant net energy exporter, with an energy surplus of more than C$ 5 billion in both February and March.  The U.S. trade deficit is chronic and massive.  The merchandise trade imbalance last quarter was almost $200 billion in size; even after netting out a sizable services surplus, the goods and services deficit of $149.8 billion was 7.8% or $3.0 billion per month wider than in the first quarter of 2011.  Commerce with China, whom candidate Mitt Romney promises to designate a “currency manipulator” if elected president, accounted for about half of the increase in the merchandise trade deficit between 1Q11 and 1Q12.

FOMC statements continue to dissuade speculation about policy tightening anytime soon and to keep alive the possibility of additional stimulus.  The under-performing U.S. labor market, where employment remains 5.0 million lower than in January 2008 and just 504K higher than at the end of 2000, has been a principal justification for the Fed’s extremely loose monetary stance.  In Canada, by contrast, talk is spreading that its central bank is likely to be the first monetary authority in the Group of Seven to tighten and that such could happen before the end of 2012.

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



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