Jobs reports: A tale of two countries

It may not have been the best of times, nor the worst of times on the North American jobs market in June, but there was a marked difference between how Canada and the U.S. are shaping up.

The Canadian economy created 28,000 jobs last month posting its third consecutive month of growth, helped by a gain of 21,000 part-time jobs. While the overall number of jobs is not huge, it blew the doors off economists’ expectations of just 10,000.

Statistics Canada said Friday the country’s unemployment rate held steady in June at 7.4% as the number of people entering the workforce increased.

“Despite what is shaping up to be a weak Q2 for production and a period of elevated economic uncertainty, Canada’s labour market appears to be on a winning streak, driven by an upturn in private-sector hiring,” wrote CIBC economist Emanuella Enenajor. “Ongoing business-sector workforce expansion is an encouraging indication that Q3 growth could pick up from Q2’s expected soft 1% pace.”

BMO deputy chief economist Douglas Porter called the report a small point in favour of the of the Bank of Canada gradually raising its key interest rate later this year.

“If you blinked, you may have missed the slowdown in Canada’s job growth,” Porter wrote in a note to clients. “While the details of the release may not be as impressive as the sturdy headline, there is no denying that the labour market continues to make impressive progress.”

Contrary to the notion that governments can’t create work, the public sector added 51,000 jobs in the month, while there were 22,000 new jobs in the private sector. The entrepreneurial sector took a hit, though, with a drop of 44,000 in the number of self-employed people in Canada.

Ontario, Alberta and Nova Scotia all posted employment gains in June, while Quebec and Newfoundland and Labrador saw losses. Employment was up 40,000 jobs in Ontario following a slight drop in May.

South of the border, the employment data was far from rosy.

U.S. hiring came to a near-standstill in June, as employers added only 18,000 net new jobs. The Labor Department also revised the number of jobs created in May down to 25,000. The combined result drove the unemployment rate to 9.2%.

“The June jobs report was a shocker. It was far worse than expected, and weak on all key dimensions—job creation, unemployment, the length of the workweek, and hourly earnings,” writes Nigel Gault, chief U.S. economist at IHS Global Insight.

“The recent pattern of jobs suggests that the economy hit a brick wall in May. It added an average of 215,000 jobs per month in the three months ended April, but only 22,000 per month in May and June.”

The American economy typically needs to add 125,000 jobs per month just to keep up with population growth. And at least twice that many jobs are needed to bring down the unemployment rate.

Unfortunately, the largest employer is slashing—governments cut 39,000 jobs in June. Over the past eight months, federal, state and local governments have cut a combined 238,000 positions.

Hiring has slowed sharply in the past two months, after the economy added an average of 215,000 jobs per month in the previous three months.

Economists have said that temporary factors have, in part, forced some employers to pull back. High gas prices have cut into consumer spending. And supply-chain disruptions stemming from the Japan crisis slowed U.S. manufacturing production.

Gault isn’t buying it.

“A delayed response to the cumulative impact of surging commodity costs during the first half of the year is a more plausible explanation, but this report has dashed hopes that the economy was about to accelerate again now that those costs have eased back.”