A favourable U.S. jobs report released April 1 is a sign that the economic recovery below the border is picking up steam. That’s good news for western Canada’s growth, too.
The report, from the U.S. Bureau of Labor Statistics, showed 215,000 net new jobs since February’s 245,000 jobs, surprisingly more than the consensus forecast of 205,000 jobs. Major movement in new jobs occurred in retail trade, construction, and health care, while job losses occurred in manufacturing and mining. The encouraging employment number confirms what market watchers have been saying about the U.S. economy over the past few months: the U.S. economic recovery is gaining momentum.
The March private sector job numbers came in at 195,000, down from February’s 236,000 private sector jobs, but well ahead of January’s 155,000 jobs. It is a positive indication that the U.S. economy is getting its mojo back.
Other labour force indicators are relatively stable. The unemployment rate climbed slightly from 4.9% to 5.0%, with little change in the actual number of unemployed workers.
In a blog this week, economist Mohamed A. El-Erian pointed to concerns with the U.S. labour force, particularly the labour participation rate and the employment-to-population ratio.
Since 2011, retired baby boomers and discouraged workers as enduring fallout from the 2008 recession have contributed to the decline in the labour force participation rate. The rate was 66.2 at the beginning of 2008. Those numbers are now moving in a positive direction. The participation rate increased to 63.0 in March, up from 62.9 in February. That indicates more people are coming back into the labour force, further consolidating the positive job growth.
The employment-to-population ratio also went up to 59.9 from 59.8, a modest increase but trending in the right direction. Even average weekly wages increased, rising 0.2% in March after edging down 0.7% in February. The annual change in average weekly wages stayed at 1.9%.
How does U.S. job growth affect western Canada?
As our major trading partner, the health of the U.S. economy matters. This is especially true after the bashing Canada’s economy took from the free fall of oil prices. Stronger U.S. consumer spending should increase the demand for goods and services, which has been lacking recently.
Things are looking up in Canada as well. Economic indicators are pointing in the right direction. Earlier this week, Statistics Canada reported an increase in GDP growth of 0.6%, the fourth consecutive month of increased growth.
Increased output in agricultures and forestry, mining and oil and gas extraction suggest western Canadian exports into the U.S. are on the rise. Often these exports are inputs into U.S. consumer goods. With the Canada/U.S. exchange rate in our exporters; favour, Canada should start to experience stronger growth in export sales.
Even so, this economic recovery is slow. We look forward to each data release to see if the direction remains favourable. Indications are that at least for the upcoming quarter, we’re on the right track.