Canada job numbers hide the fact that private sector bleeding jobs ...

With earnings of TSX companies down 30% so far in the third quarter, we do not expect a hiring spree anytime soon

Canada may have added 1,800 jobs in October, but that number hides the fact that almost all the gains came from government and that the private sector lost more than 20,000 jobs.

The 1,800 jobs added was already a disappointment compared with the 10,000 economists had forecast. According to Statistics Canada, that left the unemployment rate unchanged at 7.4%.

The six-month average for jobs gains is now 29,400, according to Reuters. But it?s a very different story when you look at the private sector and public sector separately.

?Details of the report were much worse than the headline number with the private sector showing a loss of 21,000 in October, the fourth decline in six months,? said?Matthieu Arseneau, senior economist with the National Bank of Canada. ?Over the period, the private sector is actually showing a loss of 12,000 jobs, compared to a surge of 76,000 jobs in the public sector.?

That?s a worrying trend, because government spending cuts are on the horizon, said David Madani, Canada economist at Capital Economics.

?The 36,900 jobs added in the public sector [in October], which lifted the three-month average monthly gain to 14,500, was somewhat surprising given the consolidation well underway across provincial and federal government. We expect these gains to be reversed in the coming months,? he said.

Mr. Arseneau, meanwhile, doesn?t expect the private sector to pick up the hiring baton in the coming months, especially given the fact Canadian companies have been reporting poor earnings in the third quarter.

?With earnings of TSX companies down 30% so far in the third quarter, we do not expect a hiring spree anytime soon,? he said.

Manufacturing in particular could suffer. While the industry reported almost no change in job numbers from September to October, Mr. Madani said that the ongoing weakness in the global economy could lead to job losses in the coming months.

?Employment in this sector has stagnated and the worsening outlook for exports and domestic business investment suggests that many manufacturers might begin to layoff workers,? he said.

The recent trend of private sector jobs losses and public sector gains contrasts sharply with overall job gains since the financial crisis. Dana Peterson, economist for Citi Research, points out that since the end of the recession in 2009, the private sector has added 647,000 jobs, while the government has added about 211,000. Self employment in Canada has dipped by 35,000 during that time.

Finance Minister Jim Flaherty on Friday stressed that the private sector has been a strong contributor to job growth in Canada in the last few years.

?While this month?s numbers are modest, I?m pleased to see our economy continues to create jobs,? he told reporters. ?We have more than 820,000 net new jobs created since July, 2009, with most of those full time and in the private sector.?

But he also stressed that global uncertainty continued to weigh on Canada?s economy.

?However we face challenges from economic turbulence beyond our borders? ? especially in Europe and the United States,? he said.

Either way, the trend of government jobs propping up employment data in Canada during the last six months is worrying economists. Mr. Madani said that as governments cut back on spending, it will worsen Canada?s unemployment numbers in the coming months.

?The worsening economic outlook ? suggests that private sector employment gains in the coming months are likely to remain modest, with the unemployment rate likely resuming its upward trend,? said. Mr. Madani.

Source: http://business.financialpost.com/2012/11/02/employment-numbers-hide-the-fact-canada-is-bleeding-private-sector-jobs/

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