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Hallie Walsh, 23, a drama major is photographed June 9 2011 during a visit to the Summer Jobs Services centre at 511 Richmond St. West in downtownToronto. (Fred Lum/The Globe and Mail)
Hallie Walsh, 23, a drama major is photographed June 9 2011 during a visit to the Summer Jobs Services centre at 511 Richmond St. West in downtownToronto. (Fred Lum/The Globe and Mail)

Canadian jobs picture appears bright - for now Add to ...

Canada's economy created a surprisingly strong number of jobs in June, but it could be the last hurrah for a long time as governments enter restraint mode and businesses grow more cautious.

Employers added more than 28,000 workers in June, Statistics Canada said Friday, almost twice the number that Bay Street analysts were expecting. The jobless rate stayed at 7.4 per cent, the lowest level in two years, instead of falling further mainly because the labour market grew as more people became confident enough in the economy to search for work.

The report suggests the economy started to pick up by midyear after a second quarter that was marred by the Japanese earthquake's effect on North American auto production. In June, the biggest job gains were in transportation and warehousing, as those sectors rebounded.

Undercutting the headline numbers, however, were signs that many employers - sensing slack in the labour market - are offering jobs and benefits of lesser quality than before the recession. Wages, for instance, grew at the slowest annual pace since December - at 2 per cent, well below the rate of inflation - a troubling development given that consumer spending was already set to taper off as households try to trim their debt.

"Businesses are hiring, but they're doing so with an eye on expense management," Craig Alexander, chief economist with Toronto-Dominion Bank, said in an interview. "It fits in with the broader picture, which is that businesses have very good balance sheets, but they're not investing and spending the way one might actually expect because they're being very cautious and they're worried about all the risks out there."

Caution may seem like a rational approach for many companies, but if the economy is to keep expanding, policy makers and economists have stressed that the private sector will need to step up as governments and consumers play less of a role.

The economy has produced about 192,000 new jobs this year, a faster pace than in 2010 and an illustration of the Canadian recovery's strength compared with other Group of Seven nations. Much of that gain, though, has been in the public sector, where hiring is certain to slow if not grind to a halt as governments tighten their belts.

Mr. Alexander reckons the three-month moving average for job creation, which now stands at a very solid 36,300 - with a "relatively even'" split between full-time and part-time work - will give way to a monthly average of about 15,000 over the next year, as the economy grows at an underwhelming annual pace of 2 per cent to 2.5 per cent. "We're either underestimating how strong economic growth is going to be, or we're going to see a marked slowing in job creation, and I think it's going to be the latter," he said.

Already, creation of part-time jobs is starting to outpace that of full-time work. In June, more than 21,000 part-time jobs were created, compared with 7,300 full-time positions, Statscan said, following a stretch of stronger monthly gains in full-time employment. Also, total hours worked grew at the slowest rate since March, another sign that many of the people being hired are having to accept jobs that don't really replicate what they had before the downturn. Offsetting this, to an extent, was a big drop in self-employment.

Friday brought disturbing evidence that the U.S. labour market is lagging far behind Canada's in its recovery, a jarring reminder that Canadian exporters' No. 1 customer is still ailing and a hit to business confidence.

Exporters are already dealing with a strong currency, so worries that a soft patch in the United States could turn into something worse, or that the European debt crisis could trigger another global financial crisis, hardly seem conducive to aggressive hiring.

"There are a lot of dark clouds on the horizon," Emanuella Enenajor, an economist with CIBC World Markets, said in an interview, noting that the Bank of Canada's quarterly survey of executives from across the country, due Monday, will give a good sense of how long companies expect the current choppiness to last.

That, of course, will be key. Ms. Enenajor expressed optimism that Canada's job growth won't necessarily slow as much as Mr. Alexander predicts, as long as employers can see through the current troubles and remain calm.

"The robust business sector hiring thus far suggests many companies could be seeing this as just a rough patch that they're looking to ride through," she said.

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