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Employment paths in U.S., Canada diverge Add to ...

Weaker-than-expected employment numbers in the United States have raised the possibility of a cross-border anomaly: A jobless recovery to the south while Canadians get back to work.

Yesterday, the U.S. jobs market was hit by its most recent disappointment - the number of first-time claims for unemployment rose for the second successive week. At 576,000, they were much higher than expectations of about 550,000, suggesting the U.S. employment picture is still anemic.

While those numbers are often volatile, there are indications the U.S. job market, and the country's overall economy, is weaker than in Canada, said Benjamin Tal, senior economist at CIBC World Markets.

Earlier this week Mr. Tal released a report showing that the length of unemployment in Canada has been quite stable during the recession, and that workers are finding new jobs more quickly than expected.

These and other indicators suggest the recession in the United States has been much worse and has lasted much longer than in Canada, Mr. Tal said, and our overall employment picture could look better than our neighbour's in the coming months.

Indeed, Canada's recession will likely be one of the shortest on record, while the recession in the United States will be one of the longest, Mr. Tal said. One reason for that is that the downturn originated in the U.S., and Canada was mainly hurt by association. "We are only second-hand smokers here," he said.

However, in some parts of the country - particularly Ontario - the economy is so closely linked to the United States that the unemployment situation will more closely mirror what is going on south of the border, he said.

Robert Kavcic, an economist at BMO Nesbitt Burns, said the main difference between the Canadian and U.S. labour markets is that Canada's employment picture will likely recover more quickly than the United States.

"You'll probably see a stronger [employment]recovery in Canada just because we're expecting an overall stronger economic recovery," he said.

One factor that will slow the U.S. recovery - both broadly and on the jobs front - is its still-struggling housing sector, Mr. Kavcic said. The housing crisis damaged the credit markets, and credit is still not flowing to consumers. Because Canada doesn't face this issue, economic recovery and job creation should be quicker here, he said.

BMO is projecting 0.5-per-cent job growth in Canada in 2010 and 0.2 per cent in the United States.

Economic consultant Dale Orr said it is possible that Canada could see better improvements in employment than the United States, but he thinks a more likely scenario will be similar, but weak, job growth on both sides of the border.

Government stimulus in both countries is going into capital-intensive businesses that hire relatively low numbers of employees, Mr. Orr said. "Both countries are going to see a recovery where there is a lot of output ... [but with]the unemployment rate continuing to go up."

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