Labour markets in Canada and the United States both slowed in June, in a sign of even more frustrating times to come for those in search of employment.
Canadian employers added a net 7,300 workers in June, Statistics Canada said Friday, and the jobless rate fell unexpectedly to 7.2 per cent. But while the gain was the fourth in a row, it followed an increase of 7,700 in May, reinforcing a view that a much more impressive stretch of hiring earlier this year will not be repeated any time soon.
Indeed, Canada’s unemployment rate, which was expected to hold steady at 7.3 per cent, dropped only because fewer people chose to look for work – a sign of skepticism about the economy’s prospects.
There is good reason for Canadians to wonder whether the best part of 2012 is behind them. In Washington Friday, the U.S. Commerce Department said payrolls rose by 80,000 in June – less than Wall Street analysts had hoped for – after similar gains in May and April, and the unemployment rate stayed at 8.2 per cent. Gains of that size are not sufficient to bring the jobless rate down much, if at all, potentially making it harder for Canada’s No. 1 export market to shrug off the effects of the European debt crisis.
The three months of anemic job gains in the world’s biggest economy follow average increases of 226,000 from January through March, a pace many observers believe reflected an uncharacteristically warm winter that spurred hiring in the construction industry. T
he U.S. economy is still growing, to be sure, but at a sluggish pace. That has investors’ eyes turning to the U.S. Federal Reserve Board, which holds a two-day policy meeting starting July 31, at which it may signal it is getting closer to launching further stimulus measures.
With the Fed’s main interest rate still at a record low 0.25 per cent, policy makers’ best weapons are unconventional measures such as seeking to lower borrowing costs by creating money to buy financial assets – a strategy known as quantitative easing (QE) that the central bank has tried twice before.
Quantitative easing, however, is highly controversial, because Republicans and some voting members on the Fed’s policy committee worry that it debases the U.S. currency and risks stoking inflation. It could be even more contentious during a presidential campaign in which Barack Obama’s re-election prospects are directly tied to the health of the economy.
“The U.S. economy is kind of stuck between not being quite weak enough to justify full-blown QE – especially in the runup to an election – but obviously not being strong enough to reassure investors that it’s not required,” Andrew Grantham, an economist with CIBC World Markets, said in an interview.
No sitting commander-in-chief other than Ronald Reagan has managed to hold onto the White House when the unemployment rate was above 6 per cent at the time of the vote, a fact not lost on Republican presidential challenger Mitt Romney.
Mr. Obama on Friday called the addition of jobs in June “a step in the right direction,” but acknowledged the economy needs to grow “even faster.”
Mr. Romney, meanwhile, reportedly called the jobs data a “kick in the gut,” and said Mr. Obama is “going to have stand up and take responsibility” because his policies “have not gotten America working again.”
There is arguably already a case for Fed chairman Ben Bernanke to deploy a third round of QE, with the U.S. jobless rate well off the Fed’s optimal level of about 5.5 per cent. Still, analysts say he will need more evidence that the economy is at risk of backsliding before he pushes hard for more QE, especially since it was only a couple of weeks ago that the Fed extended a less potent program called Operation Twist.
“They really have to give the Twist extension a chance to work,” Mr. Grantham said.
Economists in Canada, though, worry that job growth on this side of the border will not pick up until U.S. employment does. Also, many noted that the June increase came mostly from public-sector jobs, in areas such as education and health care while the private sector reduced payrolls for a second consecutive month, and the manufacturing sector had its first net losses since November.
That points to a longer, more frustrating search for many of those who are still looking for work.
Eric Sacchini, a McMaster University engineering graduate who this month will start a full-time contract at L3 Wescam in Burlington, Ont., said in an interview that he had been looking for a job since last September. At one point, after two rounds of interviews with one firm, he was told they were no longer hiring for that particular position. “It was brutal,” he said.
With files from reporters Ora Morison in Toronto and Kevin Carmichael in Washington.