January’s Labour Force Survey release is (to me, anyway) an unexpected array of good news:
- December’s employment data were revised upwards from a loss of 18,700 jobs to one of 2,900
- Employment increased by 46,400 in January
- The employment rate increased to 63.8%, yet another new record.
- Full-time employment went up; part-time employment went down
- The private sector was the source of employment growth, reversing the last few months’ worrying trend in which jobs were mainly being created in the public sector.
Once again, a comparison with recent US experience is instructive. Statistics Canada’s employment rate is not directly comparable with the Bureau of Labor Statistics’ civilian employment-population ratio, so differences in the levels of the two series should be taken with a grain of salt. But the trends suggest two very different stories:
If Canadian employment levels hold steady while those in the US fell, it would be for the second time in a row.
Worthwhile Canadian Initiative 
Would you take the fact that the loonie has depreciated and not appreciated when bad economic news comes out of the United States as a signal that the two economies are intertwined?
I think it’s more precise to say that forex traders believe that bad news in the US means even worse news for Canada. If they thought that the effects were proportional, there shouldn’t be much effect on the exchange rate.
My point here would be that forex traders may have got it wrong. And not for the first time.
I suspect the effect Tony is seeing is due to the fact that bad economic news in the U.S. tends to drive oil prices down and the loonie is effectively a petro-dollar.
Mike has it right – loonie is moving completely in step with oil prices these days.
But that ‘snap back to convergence with the US rate’ didn’t happen in 2001. There’s no hard-and-fast rule that says that employment patterns here must necessarily follow those of the US.
In previous expansions, in which the source of growth was exports to the US, then a slowdown in the US would be a clear and present danger. But that’s not the case this time around; exports have stayed flat while domestic demand has driven the expansion. (See this post)
A US slowdown will certainly be a negative for the Canadian economy – as it will be for everyone else. But there’s much less reason for us to panic this time.