[DIV id=headline][H2]Western job boom the envy of Ontario [/H2][/DIV][DIV id=author][P class=byline]HEATHER SCOFFIELD
[P class=source]From Saturday's Globe and Mail
[UL class=columnistInfo][/UL][/DIV][DIV id=article style="FONT-SIZE: 100%"]Canada's energy-high Western economy pulled the national unemployment rate back down to 30-year lows in February, overshadowing Ontario's struggle to create more jobs in the face of a strong currency.
The country's unemployment rate fell to 6.4 per cent in February, matching 30-year lows set at the end of last year, as employment increased by 24,700 positions last month, Statistics Canada said yesterday.
Alberta's unemployment rate fell to a rock bottom 3.1 per cent, the lowest in three decades and a rate almost unheard of in recent history.
[DIV class="bigbox ad" id=boxR][SCRIPT type=text/XXXXscript ads="1"]aPs="boxR";[/SCRIPT][SCRIPT type=text/XXXXscript]var boxRAC = fnTdo('a'+'ai',300,250,ai,'j',nc);[/SCRIPT][/DIV]Wages in the red-hot province surged 6.1 per cent over the past year, well ahead of the average 3.3 per cent gain for the country as a whole.
British Columbia also saw its jobless rate drop to a record low of 4.8 per cent. But while Ontario's unemployment rate dipped too, it was only because more young people gave up looking for work. The Central Canadian province actually saw 17,000 jobs disappear last month.
For the year, however, employment in Ontario increased by 88,000 positions.
As a whole, the job market in Canada is clearly booming. A total of 275,000 positions have been created over the past year, of which 241,000 are full-time. And economists predict the low unemployment rate will be with us for months to come.
"The Canadian labour market is strong, job creation has been healthy and unemployment is low," said Craig Alexander, deputy chief economist at Toronto-Dominion Bank.
Indeed, Canada's economy is in a sweet spot that should calm any inflation jitters at the Bank of Canada as unemployment edges lower and productivity climbs, economists say.
As the economy pumps out jobs, at the same time companies are making more with less, reversing a trend of lacklustre productivity that has dogged the Canadian economy for the past two years.
In 2005, productivity in the business sector rose 1.1 per cent, after declining by 0.4 per cent in 2004 and showing no improvement in 2003, Statistics Canada said.
Manufacturing, under intense pressure from the strong Canadian dollar and high energy prices, was responsible for most of the boost in productivity, surging 5.2 per cent in 2005. While some of the productivity increase in manufacturing was on the backs of employees — 120,000 jobs have disappeared in the sector since the end of 2002 — factory output has actually been increasing at the same time.
The fourth quarter was the first time in almost five years that Canada's productivity growth has outpaced the United States.
For the year, the United States saw productivity grow twice as fast as Canada, but the gap between the two countries narrowed to 1.6 percentage points — the lowest in five years.
"After three years of virtually no growth in productivity, we're finally starting to see signs of sustained recovery," said David Wolf, economist for Merrill Lynch (Canada).
Taken together, the unemployment and productivity reports show a solid economy that is increasing its growth potential and employing its workers, while not putting much upward pressure on inflation. And that means the Bank of Canada could be in a position to relax a bit on its anti-inflationary stand and let the economy grow without raising rates much more.
"I certainly think you can make that argument, that the bank can afford to be a little more lax with [monetary] policy than it otherwise might be," Mr. Wolf said. "It's the kind of phenomenon that would give the Bank of Canada some comfort in letting the economy run."
Unless, of course, wages and compensation show signs of surging, and in turn push up the pace of inflation. And that may well be the case.
"The chink in the armour may be that productivity growth has not kept pace with compensation," Mr. Wolf said. Yesterday's labour force report showed hourly wages rose by 3.3 per cent over the past year — not high enough to cause great alarm among inflation-watchers. But the productivity report, which measures compensation differently, suggests that payrolls have significant momentum. According to this report, the average growth in compensation for 2005 was 3.5 per cent, but in the fourth quarter it soared by 5 per cent from a year earlier — a five-year high.
If Canadian companies are able to improve their productivity performance, however, Canada could well find itself in a "Goldilocks scenario," where the economy can grow, there are jobs aplenty, there is little inflationary pressure on the horizon, and the Bank of Canada can leave interest rates low, said Wojciech Szadurski, economist with Global Insight (Canada).
Productivity would have to increase by about 1.7 per cent — up from 2005's 1.1 per cent — for that to happen, Mr. Szadurski said.
"This is what we can hope for."
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