A surprising dent in Canada's job creation numbers stood in stark contrast Friday to a big upswing in America's employment picture as the latest jobs numbers from south of the border showed momentum for a recovery starting to build.
Statistics Canada reported Friday that employment rose by only 2,300 jobs in January - statistically meaningless and continuing a seven-month stretch of disappointing results.
The Canadian dollar fell a third of a cent on the report, which was issued at 7 a.m. ET, but quickly reversed course 90 minutes later when the U.S. reported its economy had pumped out 243,000 jobs - the most in nine months - and its jobless rate fell to 8.3, the lowest in three years.
With more people looking for work during the month in Canada, the paltry gain was not sufficient to keep the unemployment rate from rising for the third time in four months to 7.6 per cent, the highest since April.
Bank of Montreal economist Douglas Porter said the market reaction was great news for the U.S., but also beneficial to Canada. By mid-morning, it had helped power the loonie up one-fifth of a cent to 100.24 cents US.
"That's the big story even for Canada today, because it really does look like the U.S. economy has shaken off the rust and is up and moving again," he said.
"I think one of the big themes this year is that after six years of Canada outpacing the U.S., the shoe is on the other foot this year. It looks like the U.S. is finally starting to outgrow Canada."
On employment, the U.S. is still more than five million jobs below pre-recession levels, while Canada has recouped all of its losses.
Porter said Canadians should benefit from U.S. growth, given that about 70 per cent of exports head to markets south of the border.
With a lag, a stronger than expected U.S. recovery this year should be supportive of job creation in the goods producing sector of the Canadian economy, manufacturing, transportation, wholesaleing and resource extraction, he said.
But the continued weakness in the Canadian economy and particularly on the jobs front has some economists calling for policy-makers to act to stimulate the economy.
The consensus going into Friday's report had been that Canada would see a 25,000-job pop, given that the labour market had been weak for some time.
After a strong start in 2011, employment in Canada has largely stalled since last summer, with only 20,000 or so jobs being added in the last six months.
Over the past 12 months, the economy has produced 129,000 new jobs - almost all in the first six months - one of the weakest records in a non-recessionary period in many years.
The second-half stall has coincided with generally weaker economic conditions and declining business confidence due to uncertainty in the global situation. Earlier in the week, the agency reported that the economy contracted slightly in November following a flat growth reading in October.
Wage gains also continued to track below the increase in cost of living at two per cent, compared to the 2.3 per cent inflation rate. In Ontario, the wages were only one per cent higher than a year earlier.
"Given the headwinds confronting Canada's economy, we doubt economic growth is about to rebound significantly any time soon," said David Madani, an analyst with Capital Economics. "We think more monetary policy stimulus will soon be needed."
But other analysts noted that Bank of Canada governor Mark Carney has been reluctant to cut the policy interest rate from the current one per cent, for fear of stimulating more borrowing and higher household debt.
The employment result is expected to renew calls from opposition parties in Ottawa for the government to abandon its planned austerity measures, which by one report will eliminate over 60,000 jobs in the next three years.
"Laying off public-sector workers and cutting public spending that supports private-sector jobs threatens Canada's soft labour market," said economist Erin Weir of the United Steelworkers union.
Most economists believe conditions in Canada, as well as job creation, will remain weak throughout 2012.
The strongest indicator in January's report was that the number of employees in Canada rose by 39,200, offset by a similar decline in self-employment.
That is usually considered a good sign because in a weak economy, many who can't find work will resort to generating their own jobs even if the pay is lower.
By sector, employment rose in the education, information, culture and recreation, and in other service industries in January.
Meanwhile, there were a big loss of 45,000 workers in the professional, scientific and technical services industries, and construction shed jobs despite the warm temperatures during the month. Manufacturing saw a small pick-up but remains 44,000 down over the last 12 months.
Regionally, there were few major changes in any province except Quebec. After a sharp drop in employment the previous few months, Canada's second most populous province saw 9,500 new jobs added, bringing the unemployment rate down three-tenths of a point to 8.4 per cent.
