Friday, April 07, 2006

Commodity Price Boom Reflected In North American Job Numbers

Today employment numbers were released for both the United States and Canada. The U.S. report were mixed with fairly strong employment growth and slightly falling unemployment rate, but with only a slight increase in average hourly earnings, a increase so weak that it will likely be negative after taking into account for inflation. The Canadian report were unequivocally strong, with very strong employment growth, falling unemployment and wage increases well above inflation. Compared with a year earlier however, Canadian employment growth were somewhat weaker than in the U.S.

One interesting aspect neglected by most economic analysts is the strong effect of the commodity price boom on these numbers. I have previously covered how Australia have benefited from the commodity price boom. Yet other net exporters of commodities have also benefited, and that includes Canada. The U.S. have as much natural resources as Canada and Australia, but because the U.S. have more than 9 times as many people as Canada and nearly 15 times as many people as Australia, it consumes so much natural resources that it is a net commodity importer. For that reason, the a whole loses from rising commodity prices, unlike Canada and Australia.

But U.S. commodity producers benefit of course, something we can see in this report. Overall, aggregate hours worked in the U.S. private sector rose 2.6%, while nominal average hourly earnings rose 3.4%, implying a increase in nominal labor income of about 6%. But in the natural resource sector, aggregate hours rose a full 7.2%, while average hourly earnings rose 6.7%, implying a total increase in labor income from the natural resource sector of 14.2%.

The same thing goes in Canada where overall employment rose 2.1%, but employment in the sector "Forestry, fishing, mining, oil and gas" rose a full 8.6%. No sector breakdown for hourly wage increases is available for Canada, but as hourly earnings in the most natural resource rich Canadian province, Alberta, were a full 7.0% versus the Canadian average of 3.5%, it seems safe to assume that wage increases in the commodity sector greatly exceeded that of other sectors.

Alberta have had much stronger growth than the Canadian average in recent years for two reasons. First is the already mentioned factor of its vast natural resources and second is the fact that it is a more conservative province than the rest of Canada and so have lower taxes and less regulations. Alberta have a employment rate of 70.6% versus the Canadian average of 62.9% and its unemployment rate is only 3.4% versus 6.3% for Canada as a whole. The strong income gains in Alberta have pushed up the value of the Canadian dollar to multi year highs against the U.S. dollar, something which have increased problems in manufacturing intensive Ontario and so increased the regional divide in the Canadian economy.


Post a Comment

<< Home