Canada's murky jobs picture

You can almost see the economists and politicians wiping their brows in relief after Canada posted decent job gains in August.

It was only 15,200 new jobs, but compared to the teeth gnashing that occurred among these same people with July's weak numbers, this latest report is gold.

"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 Economics' economist Doug Porter in a note on Friday.

Gloom and doom or sunny skies?

The brightening jobs picture in August was certainly an improvement over what happened in July when the Canadian economy chewed up 55,000 jobs.

Even more interesting, Canada's manufacturing sector, which has lost more than three per cent of its workforce, generated almost 14,000 jobs in August compared with July.

Shift change at Windsor Transmission Plant. Canada's manufacturing sector created 13,800 new jobs in August.(Jerry Mendoza/Associated Press)

But the palatable sighs of relief on Bay Street and in Ottawa seem to belie the fearful predictions for the country's unemployment situation just a month earlier.

Back then, economy watchers were ringing the recession alarm bells as the country's employed workforce fell significantly.

Making sense of the data

One reason for the market's schizophrenia concerning Canada's unemployment situation centres on the numbers themselves, according to experts.

Economists pointed out that monthly unemployment figures can bounce around significantly, making predictions based upon a small snapshot a risky proposition.

"We take one-month numbers with a grain of salt given the huge standard error associated with a survey of this size," said CIBC World Markets' Avery Shenfeld in an analysis of August's unemployment figures.

Essentially, the number crunchers at Canada's statistical agency often revise the jobs data as they get more information.

As well, one-time events, such as a single plant closing or large strike can significantly impact the job figures, making that month's report an accurate count of the number of employed but yielding precious little real information as to where the economy is headed.

Look to longer term

Such short-term jumps make the longer term more important for economists assessing Canada's economic picture.

Here, jobs growth is positive but not overly exciting.

New jobs (Aug. '08 vs. Aug. '07)Per cent growth Overall 1.3 Private 1.0 Public 3.9Source: Statistics Canada

Canada has created new jobs this year, almost 225,00 across all industries, an increase of 1.3 per cent comparing this August with August 2007.

Thus, the economy continues to absorb new workers, just not at the rate that it did in the more recent past.

For example, when comparing new jobs last December with December 2006, Canada increased its workforce by 2.1 per cent, a clip 60 per cent faster than the August rate.

And the longer-term picture also looks different when figuring out the source of these new jobs.

In August, Canada's various levels of government cut their payrolls by nearly 24,000 people while private companies boosted their employment number by 40,900, according to Statistics Canada.

That was compared with July's data.

Comparing this August with last August, however, changes the picture.

In that case, the public sector continues to add more jobs than private companies, 127,400 versus 117,600, and at a faster clip, 3.9 per cent compared to 1.0 per cent.

Bottom line

Thus, the picture for the Canadian economy painted by many economists appears much more prosaic than the headlines in various newspaper.

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

South of the border, the situation appears clearer — and bleaker — than Canada's.

In August, U.S. payrolls fell for the eighth straight month, losing 84,000 jobs while the country's private sector has lost more than 100,000 positions.

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