Statistics Canada released some happy data on January 6. The agency reported that the economy created 54,000 jobs in December, an uncommonly large number for a single month. We also learned that the value of exports exceeded that of imports for the first time in more than two years in November. Bank of Canada Governor Stephen Poloz for months has argued that Canada’s economy isn’t terrible. This new data suggests he’s right.
We must be careful of making too much of one month, of course. Trade figures are especially volatile, so it is too soon to declare that exports are back. If they are, Canada could be in store for a decent 2017, assuming the next U.S. president backs away from threats to harass his country’s biggest trading partners. (A trade deficit with the United States would make it harder for Donald Trump to say that Canada is “winning” from the North American Free Trade Agreement at America’s expense.) StatsCan said employment increased by 108,000 in the final three months of 2016, the largest quarterly increase since the second quarter of 2010. That represented more than half of the 214,000 positions created over the calendar year. Record levels of household debt surely will constrain consumer spending, but employment gains should steady household demand.
What else? Here are a few more things to note from the latest batch of significant Canadian economic data:
Cool it, millennials—grandma needs a job
The 1.2% increase in employment in 2016 was the biggest gain since 2012. Thank older workers, who are giving up on the idea of early retirement. The number of people with jobs aged 55 and older increased by 105,000 last year, while the number of employees in their prime working years of 25 to 54 rose by 100,000. The population of younger workers was little changed.
We don’t talk enough about this shift. The policy debate around aging tends to focus on protecting retirement. That is important, but what of all those older men and women who are choosing — or feel compelled to choose — salaries over pension checks? StatsCan estimates that the number of men and women older than 55 who joined the labour force in 2016 — in other words, those who said they were looking for work — was triple the increase in employment in that age group. There is an opportunity here to support a shift to an economy more oriented toward services. Many of those older workers are hanging around as self-employed consultants. Are there things that can be done to encourage them to expand at their advanced ages? To what extent is the path to a first job for graduates being blocked by a growing population of older workers? It is time to start considering these questions and others.
Speaking of services
The Bank of Canada increasingly sees Canada’s economic future in making computer codes, not gadgets. Exports of technological know-how, along with other services such as banking and tourism, have responded faster to the central bank’s low interest rates than traditional manufacturing. StatsCan doesn’t include services in its monthly trade report. But it does measure employment in services on a monthly basis. The data explain the Bank of Canada’s shift in focus: employment in service industries increased 2% in 2016, while jobs related to the production of tangible stuff dropped 1.6%. Service companies for decades have been Canada’s biggest employers, but the gap with goods industries has never been greater. Expect the policies of the central bank and federal and provincial governments to reflect that reality.
New Risk for 2017: Atrophy
Exports to countries other than the U.S. rose 9.5% in November to a record $12 billion, StatsCan said. For a country desperate to diversify its markets, this is a good sign. Perhaps a weaker currency is finally giving Canadian a products a push? (The increase was led by a big shipment in coal to China.) Yet non-energy exports of merchandise goods continue to struggle and there is little evidence that Canada’s manufacturers of goods have made the investments necessary to keep pace in global markets.
Imports of machinery and equipment declined in November, confirming an autumn surge really was all about an one-time purchase of offshore oil equipment. A weaker currency is helping Canadian competitiveness, but companies must also do something to help themselves.
MORE ABOUT THE ECONOMY:
- Canada isn’t projected to run a balanced budget until at least 2050
- Why Donald Trump could herald a boom for Canada—at least in the short term
- How higher interest rates could make Ontario’s debt problems even worse
- B.C. is desperate to keep its housing bubble aloft. It won’t work
- Real estate pros see risks and opportunities in B.C.’s no-interest loan scheme
- Wall Street might have been a safer place if it had been “Lehman Sisters”
- The U.S. Fed’s interest rate hike is a message: inflation is back
- Prepare for a gap to open between Canadian and U.S. interest rates