Confidence is strong, but are job stats misleading?

(July 12, 2005) Canadians are optimistic about their economic future, due in large part to stable interest rates and falling unemployment numbers, but critics say consumers are being misled by job creation statistics.

Despite volatile number reported by the University of Michigan, Canadian confidence has remained steady and strong during the past three quarters. Today, Canadian confidence numbers are about on par with those collected south of the border.

A recent survey of more than two-thousand Canadians conducted by Decima Research for Investors Group found consumers in the west are more confident than those in the east. The highest confidence levels are found in Alberta, while the Atlantic provinces recorded the biggest drop and lowest confidence levels across the country.

The May survey of consumer expectations found that Canadians were more optimistic than Americans about the economic future for the first time since 2003. “Stable employment, relatively little recent movement in interest rates and a stable to dropping unemployment rate are all factors [contributing to] strong and steady consumer confidence levels in Canada,” says Charles Feaver, vice-president of research at Investors Group.

Still, some critics say confident Canadians are being fed misleading numbers that are actually masking the reality of Canada’s employment picture.

Although overall unemployment is down to 6.7%, Mark Swartz, a Toronto-based career consultant and author says top line numbers disguise the fact that job creation is falling. “We’ve been fooling ourselves about this disturbing reality by focusing on the unemployment rate, not job creation,” says Swartz. He says the illusion of growth is most evident in the private sector, which counts self-employment as full time, private sector jobs. “Recent statistics suggest a growing deficit in genuine jobs masked by inflated rates of self-employment.”

Economists on the other hand argue the labour force is doing just fine — employment is at record levels, and self-employment, in theory anyway, is a source of potential job growth down the road.

“I would argue that the labour force is quite healthy,” says Eric Lascelles, economist at TD Bank Financial Group “Even if you don’t like the unemployment rate, and there are a lot of complaints about it — discouraged worked get yanked off [unemployment] and they don’t get counted as unemployed — but the broad picture is one in which Canada’s employment rate is very near record levels.”

“Cutting through all the complications, we’ve got essentially a record share of the population working,” he adds. “It’s hard to argue that the labour force is in much trouble from that perspective Not all jobs are precisely created equal, and clearly full-time jobs are preferable to part-time jobs in general, but 2004 actually saw a great deal of strength in full-time jobs.”

Even if job growth slows, he says the labour market remains robust, almost to the point of becoming an inflation concern. “This is something that the Bank of Canada has no doubt looked at quite closely,” he says. “They very clearly suggested they’ll likely start raising interest rates in September. I have to think one of the drivers is the tight labour force.”

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com