It’s been badge of honour for Canada on the world stage: the only major economy to recoup all the jobs lost in the recession.
Prime Minister Stephen Harper, Finance Minister Jim Flaherty and scores of economists all trumpeted the rapid jobs recovery as evidence that Canada beat the world in getting back on its feet after the worst global slump in more than a generation.
Unfortunately, it’s not true.
Revisions released Friday by Statistics Canada show that the country is still roughly 30,000 jobs shy of getting back all the jobs destroyed, based on updated population data from the 2006 census. The revisions underscore the reality that the Canadian economy is still facing a lot of turbulence, and that it’s no longer outperforming the rest of the world.
“At some stage we have to turn the page and move on, and look at where the economy is going in the next couple of years, rather than where it’s been,” Toronto-Dominion Bank economist Pascal Gauthier said.
A few tens of thousands of jobs either side of the pre-recession waterline doesn’t change the overall picture, Mr. Gauthier pointed out. Yes, Canada outperformed many others with its quick snap-back from recession, but lagging exports, competitiveness and productivity may hold it back in the months ahead, he said.
“The revisions tell us there’s still some road ahead in terms of recovery in employment,” Mr. Gauthier said.
Statscan’s initial estimate, based on the 2001 census, showed Canada returned to neutral last August, and continued to gain jobs in the months since. Now, the agency says Canada lost 428,000 jobs between October, 2008, and July, 2009, and has only recovered 398,000. That leaves the country short of where it was, and even farther away from where it needs to be just to keep pace with the growing population.
From an economic standpoint, the revisions aren’t overly significant. The net change over the past two years amounts to 75,000 jobs, or about what a healthy Canadian economy would create in a month, pointed out Scotia Capital economist Derek Holt.
Nonetheless, the revisions are a powerful reminder to policy makers that they should stop relying on the “tired” refrain that Canada is outperforming its rivals in jobs and economic growth, Mr. Holt said. It’s no longer true, and several other economies are now generating a lot more economic momentum than Canada, most notably the United States, he said.
“The political tone to the revisions is more important than their economic significance,” Mr. Holt said. “We can’t lay claim to being the best-performing economy anymore.”
He said past performance is a poor predictor of what will happen next. In a research note this week, Mr. Holt highlighted five reasons why the U.S. economy will do better than Canada’s this year and next, including more fiscal stimulus, greater pent-up consumer demand, suddenly cheap house prices, depleted business inventories and Canada’s lagging export competitiveness.
Canada continues to face challenges in export markets, productivity, competitiveness and unit labour costs. And all of those factors will limit economic growth and job creation in the months ahead, he said.
Ultimately, the jobless rate is better gauge of whether the labour market has returned to pre-recession conditions, TD’s Mr. Gauthier said. And at 7.6 per cent (unchanged since December), it’s still more than a full percentage-point higher than what it was when Canada tumbled into recession at the end of 2008.
There’s also some evidence that the quality of the jobs created since the recession isn’t the same. Toronto-based economist Arthur Donner said high-wage, goods-producing industries are still about 40 per cent below pre-recession levels. Governments have played an outsized role in job creation.
Mr. Gauthier, however, said that the trend in recent job creation isn’t significantly different than in previous recessions in terms of measures, such as the mix of part-time versus full-time hiring.
The next snapshot of how Canada’s labour market is faring comes next Friday, when January’s jobs data are due.
Friday’s revisions also affect job-creation figures for November and December. Statscan now says 30,000 jobs were created in December, up from the estimated 22,000. November saw only 6,000 jobs created, instead of the previous estimate of 15,000.