Slight increase in July unemployment shouldn’t overshadow gains of 2010

We knew it wouldn’t be that easy! The steady return to a healthy job market in Canada showed 6 consecutive months of job growth to begin 2010 but July marked a moderate setback in unemployment but not to the extent where alarm bells should be ringing about the overall positive markers in the economy. When compared with other leading economies there is little concern that the recovery is losing much steam, in fact the reversal of job growth is partly seasonal as more job seekers enter the market.

Image courtesy Dusko Dokosic

However Statistics Canada have reported that Canada lost 9,000 jobs in July which is in stark contrast to gains of over 300,000 so far this calendar year. Analysts felt that July and August might cause a ripple of stagnation but the big picture should still be looked at rather than dwell to deeply on a single result. During the downturn of ’08/’09 about 400,000 Canadian jobs were lost in the recession and they have all now been recoved over the last 12 months, an extremely positive signal when compared with the US where less than 25% of the estimated 8.4 million job losses have been recouped. Also worth noting is that the recession ‘conditions’ lasted about 24 months in Europe in the US while just about 10 months in Canada.

Construction was one of the hardest hit sectors in Canada with the loss of over 120,000 jobs, at the time of writing more than 110,000 of those jobs have now been replaced with the industry itself showing year to year growth of 8.6%. Elsewhere construction jobs compared with a year ago remain in negative territory with falls of over 6% in Spain and the US.  Housing construction has returned to a fairly healthy position in Canada while other countries see a market filled with foreclosures capping both demand and investment for new construction.

While the manufacturing sector has yet to see job growth of any note there has been at least a year of steadiness to offset the panic within an industry that witnessed five consecutive years of decline. Much of this quiet confidence centres around an auto industry that is slowly regaining footing after the perilous days of negative equity just a few years ago. Not aiding manufacturing is the more difficult climate for export sales due to the near parity in exchange rates with the US, not to mention the continued paucity in demand from that same market.

Canada is seeing some speed bumps in the recovery due to the market dependence with other nations and is almost reacting like an engine that is ready to drop the clutch and move to the next gear only to see the weight of a stuttering global market slow down the acceleration. Fears in the US of a double dip recession remain alarmingly high which would not cause any positive repercussions in any G12 economy. I anticipate that intervention and legislation should just about safeguard against that but as I wrote previously the rapid recent increases in foreclosures and frailty of the US housing market lead me to think that unless housing is turned around any full recovery will be hugely bridled, if indeed it is even possible.