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Soft Canadian Job Market Masked By Public Sector Hiring Binge

Economics / Canada Aug 28, 2008 - 01:17 AM GMT

By: Mike_Shedlock

Economics One expects to hear ridiculous statements continually in the US, particularly from Bernanke, Paulson, President Bush, and various commentators on CNBC.

However, the US does not have a monopoly silly economic commentary by any means. Tom Jeffries at radio station CKNW Vancouver (see the audio links on the right hand side of this blog - a new one is posted every week or so as time permits) sent me a link to an article on the Canadian job market containing comments best described as "That's Loonie".

Inquiring minds may wish to consider Public hiring binge will end, expose soft job market, observers say .

Weakness in the labour market that has been masked by strong public-sector job growth could soon be laid bare as softening government finances put the hiring frenzy on hold.

Despite sharp declines in Canada's manufacturing sector in recent times, the country's labour market has been buffeted from overall losses - with 55,000 jobs eliminated from the economy in July - by gains in the public sector.

"We look at the overall quality of employment and were surprised to see that it has improved despite the weakening economy," said CIBC World markets senior economist Benjamin Tal. "One of the reasons for that was the fact that a lot of the new jobs were in the public sector, which has relatively high-quality jobs.

How can anyone can possibly think that the "overall quality of employment" can rise on account of public sector jobs?

In honor of Daffy Duck, I say "That's Loonie".

To be fair, Tal went on to say "This probably will not last. The days that governments run high surpluses are over. In fact, I would expect government hiring to slow down significantly over the next two to three years."

Statements of economic reality are enough to knock one out of contention for the gold medal in economic "Loonacie". With those subsequent statements, Tal has disqualified himself from the gold medal round.

The article continues with Niels Veldhuis, the Fraser Institute senior economist, chiming in with realistic concerns about public sector growth.

According to the Statistics Canada report, the proportion of public sector workers among the total employed in the workforce has remained stable at 19 per cent since 2001.

"This number is quite concerning," Veldhuis said. "The public sector as a percentage of employment is critical in terms of how that impacts our economy and our labour market, and we need to be focusing on reducing that further than 19 per cent rather than being pleased with 19."

As jurisdictions with higher rates of public sector employment tend to attract less investment and suffer slower rates of economic growth, it is imperative to make ourselves comparable to competitors, Veldhuis said.

But we are a long way off from that, as Canadian provinces have much bigger public sectors than most U.S. states.

"When you look at place like Nevada, Wisconsin and Massachusetts, they're all sitting at 10 or 11 per cent of employment. Alberta has Canada's smallest public sector at about 15.5 per cent. But when you start looking at places like Newfoundland and Saskatchewan, Saskatchewan has the highest (proportional) public sector in North America, at 27.4 per cent."

Veldhuis said government hiring should not be seen as a bromide for troubled times, as the increased government spending could force the economy into deficit and the government to raise taxes.

Loonie Comments Of The Month

Tal's initial comments got me thinking about a possible feature about the most ridiculous Canadian comments of the month. Possible titles include "That's Loonie" and "Loonie Comments Of The Month"

Thinking further, why not have a competition from the UK as well? Something like "Sterling Comments Of The Month" could work.

For the US, something like Nocents Comments Of The Month" is a possibility. I am open to other title suggestions as well as ideas on how to present them.

I am considering a competition of submitted entries in which I would post a link to the winning blog or simply the winning commentary person if there was no blog. What I would be looking for is the 5 most ridiculous country specific comments of the month (US, UK, Canada), with a short rebuttal. The only problem is I cannot spend a lot of time on this, as I am swamped as it is.

If anyone has some ideas on how to organize such a monthly competition, please email me. To help me quickly sort through the ideas, please put "That's Loonie" in the Email header.

By Mike "Mish" Shedlock

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at .

© 2008 Mike Shedlock, All Rights Reserved

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