Canada adds jobs, U.S. still losing positions

Canada appears to be breaking free from the downward pull of the U.S. recession, surprising many economists by creating jobs in August even as the American unemployment rate jumped to the highest since 1983.

Private employers in Canada, led by retailers, financial firms and real estate agencies, hired more people than they fired for the first time since September, 2008, resulting in a net increase of 27,100 positions in the month, compared with a net decrease of 44,500 in July. Canada's unemployment rate rose a 10th of a percentage point to 8.7 per cent - still the highest since January, 1998 - as the number of people looking for work increased faster than the number of new positions, Statistics Canada reported Friday.

The Canadian figures are a stark contrast to a report by the U.S. government that showed that Canada's largest trading partner shed another 216,000 workers last month. That pushes the number of jobs lost since that country's recession began in December, 2007, to 6.9 million, the most in any downturn since the Second World War. The U.S. unemployment rate rose to 9.7 per cent, and the Obama administration continues to brace for a jobless rate of as much as 10 per cent.

Marc Appleby, president of Ottawa-based Earth Innovations Inc., which sells a volcanic mineral as an environmentally kinder traction agent than salt and gravel, said he's about to move his office out of his home and add three people to his staff of four to keep up with a tripling of sales. The business is almost entirely Canadian.

Mr. Appleby's efforts to add markets in the northern U.S. have proved mostly fruitless because retailers were reluctant to try untested products amid a recession. The western U.S.-based manufacturer of the volcanic mineral also reports that it's doing little apart from filling his orders.

"We hear a sense of desperation in the U.S.," Mr. Appleby said in an interview. "In the U.S., it's all doom and gloom. In Canada, no one feels like the sky is falling."

Still, few predicted a gain in jobs in Canada. Most on Bay Street were expecting a decline in Canadian hiring of about 15,000, according to the median estimate of 17 analysts polled by Bloomberg News.

The Canadian dollar jumped the most since July, climbing almost 2 per cent to 92 U.S. cents, and the S&P/TSX composite index rose 95.98 points to 11,017.47, according to Bloomberg. In New York, the Standard & Poor's 500 index increased more than 1 per cent, as some investors chose a positive interpretation of the U.S. labour numbers because the pace of decline eased from the 276,000 jobs lost in July.

The Bank of Canada said last month the country's economy likely resumed growing this quarter thanks to extraordinary government stimulus that has supported consumer spending. Still, Governor Mark Carney and Finance Minister Jim Flaherty say the climb out of the hole created by the financial crisis will be slow, in part because labour markets in Canada and around the world - especially the U.S. - remain weak, damping consumer demand.

"The key ingredient for a sustainable recovery is still absent," Tony Crescenzi, a market strategist and portfolio manager at Pacific Investment Management Co., which controls the world's biggest bond fund, said yesterday in an interview on Bloomberg Radio. "We need income growth to produce self-reinforcing expansion."

Jobs data can be volatile, so economists resisted using the latest figures to declare a definitive end to the hard times in Canada. But the trend clearly shows that the destruction in the labour market is at least easing.

Over the past five months, employment has declined by 31,000 positions, compared with a decrease of 357,000 over the five months before that.

"I understand that people will say most gains are part-time, but at a turning point in the cycle I will take that any time," said Stéfane Marion at National Bank Financial in Montreal, one of the few Canadian economists to predict the economy would add jobs in August. "The economy is clearly on track to grow again."