Canadian Job Creation Continues but Cracks Appearing in Foundation

• 19,000 jobs created in April.
• Unemployment edges up to 6.1% from 6.0% last month.

Job growth in April topped expectations once again with 19,000 jobs created, nearly doubling consensus expectations of 10,000. Even with the addition, a faster pace of labour force growth pushed the unemployment rate up to 6.1% from 6.0% in March. Looking past the headline we are reminded of the old adage that you can't judge a book by its cover, a phrase that is equally relevant to the Canadian job market. In order to get a better picture of the future path of job growth in Canada it is necessary to dig into the details of job creation.

First it must be recognized that job creation in the first four months of this year has been very strong. Year-to-date job growth is running at almost twice the pace of the same period last year. Moreover, while we had shown concern over the pace of job creation in the public-sector versus the private sector, this trend appears to have reversed itself in 2008 - so far this year there have been four times as many private-sector jobs created as the same period last year and about half as many public-sector jobs. Taking these details alone, one has to recognize the fact that the job market remains very resilient at a time when the U.S. is under heavy pressure.

So, why fret? All's well isn't it? Not quite. Getting into the industry and regional details, we continue to see some stark incongruities that auger for a much slower pace of job creation in the future. First off, it helps to understand where the majority of the strength in job creation has been. In a few words - in construction and in Ontario. Of the 119,400 private-sector jobs created in Canada since December, 38,800 of them - a full third - have been construction jobs created in Ontario. What's more, this growth appears to be behind us. Housing starts jumped in the first quarter of this year, helping to explain much of the growth in construction jobs. However, data from the existing home market shows a significant cooling in housing demand across the country. While it may be that some of the strength in construction employment has been in the non-residential sector, the concentration of the job growth in Ontario suggests that this is unlikely to continue going forward. Ontario's economy is the most at risk from the U.S. recession and the province most likely to go into recession itself. In addition, it must be noted that employment is a lagging not leading indicator and much of the growth we have seen so far this year is likely due to past and not future economic strength. Moreover, while we exert considerable caution in taking too much out from one month's data, the considerable amount of job creation to come from self-employment (95%) combined with private-sector job losses, a second month of upward movement in the unemployment rate and a deceleration in wage growth seem to point to labour market slackening as we head into the remainder of the year.

TD Bank Financial Group

The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.