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Container ships are shown in the Port of Montreal.

Graham Hughes/THE CANADIAN PRESS

Rising exports were supposed to be Canada's ticket out of its oil-collapse doldrums.

But exports have slumped badly in the past two months, and new March numbers show the biggest trade deficit on record. When you are in a country where "serial disappointment" has become an economic catch phrase (coined by the head of your central bank, no less), it is hard not to be a little nervous – even if the experts are not ready to sound the alarm yet.

Statistics Canada reported on Wednesday that Canada's trade deficit swelled to a record $3.4-billion in March, up from $2.5-billion in February and more than double what economists had expected. Exports slumped for a second straight month, down 4.8 per cent, to their lowest level in more than two years. Ten of 11 export sectors fell in the month.

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The economic experts had thought that after a crummy February, in which exports had slumped a dreadful 6.6 per cent, the numbers would bounce back. They were wrong.

The Canadian dollar, which has been on a roll lately in light of rising oil prices and improving Canadian economic growth, took the news on the chin. The loonie tumbled nearly a full cent against its U.S. counterpart on the day, closing at a three-week low of 77.62 cents (U.S.).

With a relatively weak Canadian dollar supporting the competitiveness of the country's non-energy exports, and with the U.S. economy continuing to pick up speed in 2016, Canada's exports were expected to power ahead and lead the economy to brighter days this year, overcoming the burden of the oil slump. But a few months into the year, things are not exactly playing out as diagrammed.

Oil prices have bounced back, bringing a much stronger Canadian dollar with them and eroding at least some of the competitive advantage of a cheap currency. Even more significantly, the U.S. economy – which consumes about three-quarters of Canada's exports – has fizzled, growing at just a 0.5-per-cent annual rate in the first quarter, according to a recent estimate from the U.S. Department of Commerce. The March U.S. trade statistics, also released on Wednesday, showed a 3.6-per-cent slump in imports – evidence of the weak U.S. demand that is draining Canada's exports.

Still, the experts are not ready to abandon the game plan. It has been only a couple of poor months after several months of solid export growth. The loonie is still relatively cheap despite its recent gains, and the U.S. economy is still poised to accelerate. It's a mere setback, a passing phase, most economists argue.

And why, exactly, is everyone so convinced everything will be all right in the U.S. economy? Chiefly because of jobs, and lots of 'em. Hiring in the United States maintained a brisk pace in the first quarter despite the near-stalling of the economy: Employment grew by 628,000 in the first three months of the year, or a monthly average of 209,000, only slightly below 2015's average.

The argument is that as long as more people are working, and wages are rising (average hourly salaries are up a decent 2.3 per cent year over year), then growth in consumer spending will surely follow. Thus the slowdown in consumer demand early in the year, seen in the tepid numbers for retail sales and consumer-goods imports, will surely be reversed in short order, and consumer spending will become a key driver of improved U.S. growth in the months ahead.

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But the risk is that employment has gotten way ahead of growth in the past six months, as businesses have continued to ramp up staffing at the same time as the U.S. economy has sputtered. It would appear employers have been hiring largely in anticipation that the economy is on the cusp of an acceleration; if that does not come soon, it is hard to imagine they will continue staffing up. Even if demand does pick up again, many employers have already stockpiled staff to handle an increase in business; employment growth may be due to slow regardless.

This could already be happening. Wednesday's ADP National Employment Report, an estimate of private-sector job growth, slipped to 156,000 in April from 194,000 in March – its lowest in three years. While ADP's findings do not always jibe with the U.S. government's official monthly payroll count (which comes out on Friday morning), it does suggest employers might have begun pulling in the reins in a substantial way.

For the time being, economists are saying Canada's economic growth was still probably about 3 per cent annualized in the first quarter, as a strong start to the quarter outweighed the sluggish finish. The lack of momentum entering the second quarter probably means that growth will slow to something like 1.5 per cent, or less. But they remain confident better days are ahead in the second half of the year.

Where have we heard that before? How about pretty much every year since the Great Recession ended, and repeatedly, our hopes have been dashed – the "serial disappointment" that Bank of Canada Governor Stephen Poloz has frequently talked about. If we are going to avoid another disappointment, we will need the U.S. economy to shake off its cobwebs. If it does not, all bets are off.

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