February 21, 2014

In a rather dull U.S. January jobs report, construction adds lustre

U.S. net job creation in January was 113,000, according to the Bureau of Labor Statistics (BLS), marking the second month in a row of restrained increase. December’s number was +78,000.

For all of last year, the monthly average was +182,000.

In polling by various news agencies, analysts had been estimating this year’s kick-off month to be +180,000 as well. It’s a bit of a mystery why their assessment was so strong.

Almost certainly, there was a degree of wishful thinking in the consensus. Stock markets have stumbled early in 2014 and a better jobs report would have provided a welcome crutch.

The weekly initial jobless claims series, released every Thursday at 8:30 a.m., is a leading indicator for the monthly job-change figure. The former has been forewarning about a subdued level for the latter.

Throughout January, the number of first-time unemployment insurance seekers averaged 334,000. It needs to be closer to 300,000 for the monthly pick-up in positions to climb as high as 200,000.

The unemployment rate in January edged down by the smallest of notches, to 6.6% from 6.7% the month before.

The jobless rate in construction stayed elevated at 12.3%, although 12 months earlier it had been much worse, at 16.1%.

The number of on-site jobs in construction rose by 48,000 in the month. The breakdown among major sub-categories was as follows: construction of buildings, +21,500; heavy and civil engineering, +10,100; and specialty trades, +16,500.

In the aftermath of the Great Recession, the number of workers in construction has fallen to less than 5% of total employment in America. Placed in that context, the industry’s 42% share (48,000/113,000) of the month-to-month gain was impressive.

The bullish individual month notwithstanding, the year-over-year rise in construction employment was only +179,000. Apparently the significant improvement in new home starts — reaching the one-million-unit mark, seasonally adjusted and annualized (SAAR) — is barely beginning to translate into better construction employment statistics.

Construction (+48,000) plus “private services” (+66,000) provided 100% of the U.S. total jobs increase in the month (+113,000).

The “private services” sub-sector leaders were: professional and business services (+36,000) and leisure and hospitality (+24,000).

Employment in information services and financial activities stayed flat.

Pay stubs in retail trade diminished by 13,000.

Government payrolls were cut by 29,000. Downsizing occurred at all three levels: federal (-12,000); state (-6,000); and local (-11,000).

Contrary to the reaction to America’s labour market report, there is relative contentment with the latest employment score-card from Statistics Canada.

The total number of jobs under the flag of the red maple leaf rose by 29,000 in January.

That could be described as only “OK”, except for an important sidebar. The number of better-quality and higher-paying full-time jobs expanded by 51,000.

The offset was provided by part-time work which fell by 21,000.

The jobless rate improved to 7.0% after jumping to 7.2% in December from 6.9% in November.

Canada’s jobless percentage is now on a par with the average over the first 11 months of 2013.

The number of construction jobs, from St. John’s, N.L. to Victoria, B.C. rose by 7,000.

Put a negative sign in front of that number and you’ll have the month-to-month change in manufacturing employment (i.e., -7,000).

The largest month-to-month positive job changes among service-producing industries in Canada — with each sitting in a range from +15,000 to +17,000 — were in accommodation and food services; health care and social assistance; professional, scientific and technical services; and transportation and warehousing.

The greatest staffing reductions occurred in business, building and other support services (-25,000); public administration (-16,000); information, culture and recreation (-12,000); and retail trade (-10,000).

For various reasons — chief among them being ongoing deficits in the country’s foreign trade balance and a slightly downward bias for interest rates (i.e., as opposed to an upward one in the U.S. due to the Federal Reserve’s gradual “tapering” of bond purchases) — the value of the Canadian dollar has dropped to 90 cents U.S. from parity a short while ago.

The lower-valued “loonie” (Canada’s currency) is expected to help manufacturers generate export sales and to provide a greater incentive for foreign visitors to spend time on this side of the border. Success for either or both goals will lead to extra job-creation.

It’s always interesting and informative to compare year-over-year percentage changes in employment in four key categories between the two countries.

The U.S. is currently winning according to all four measures: total (+1.7% for the U.S. versus +0.8% for Canada); services (+2.1% versus +0.9); construction (+3.1% to +0.4%); and manufacturing (+0.8% to -1.2%).

Among Canada’s provinces, the lowest unemployment rates are still being recorded in the West.

Saskatchewan’s jobless figure (4.3%) is lowest, followed by Alberta (4.6%), Manitoba (5.6%) and B.C. (6.4%).

Ontario and Quebec are tied with unemployment rates of 7.5%.

Alberta holds onto its title as top job creator with a figure of +3.2% year-over-year.

None of the other provinces comes close.

For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog.

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