But on the ever-so-slightly brighter side, the Canadian report was not as broad-based as was the U.S. report. Although the headline number, -129,000 job cuts, is massive, the job loss was concentrated almost entirely in the manufacturing sector, 101,000 jobs slashed. The service sector job loss paled by comparison with 9,000 jobs lost.
While oil was surging in the middle of 2008, Canada resisted the U.S. contraction on strong commodity-based profits, incomes, and employment. But now the commodities markets are declining sharply, and there is no offset to the contraction in manufacturing.
This chart illustrates the sharp increase in the unemployment rate in the U.S. and Canada. Relative to a long-run level, the U.S. unemployment rate is probably slightly higher, but Canada's unemployment rate rose 1.4% since Jan. 2008, or its biggest annual decline since 1992.
The BLS conducts two surveys of the U.S. labor market: the household survey that is used to calculate the unemployment rate, and the establishment survey that is used to calculate the nonfarm payroll by sector. Canada conducts just one survey, the Labour Force Survey (LFS), from which it extracts both industry payroll and employment detail. The illustrations compare the joint employment declines across the U.S. and Canada using the comparable LFS and household survey.
This chart illustrates the sharp decline in annual employment growth in the U.S. and Canada. Note that this is not the payroll number from the establishment survey in the U.S., but the employment number from the household survey.
Canada's employment fell into negative territory in January for the first time since 1992. On the other hand, U.S. annual employment growth has been negative since June 2008 (after revisions), but the 2.88% annual decline is the biggest since 1954 (55 years, over half a century).
The Canadian and the U.S. labor markets are now quickly declining contemporaneously. The strength from the commodity markets that drove employment and earnings in Canada during the first half of 2008 is now gone. The near-term outlook for countries hangs in the balance, but more importantly, tied to the stabilization of the U.S. manufacturing sector.