More Americans are getting jobs, buying houses and feeling generally optimistic while Canada’s economic recovery appears about to stall.
Consider this tale of two economies:
• The U.S. created 243,000 jobs in January, twice the expected rate. Unemployment declined 0.2 percentage points to 8.3 per cent.
• In comparison, Canada’s economy created almost zero jobs while the unemployment rate edged up 0.1 per cent to 7.6 per cent as more people looked for work.
The latest good news came Monday, when the National Association of Realtors said the number of Americans buying resale homes in January hit a two-year high.
While far from a boom, it suggests the country is over the worst of the foreclosures sparked by the financial crisis of 2008. This follows a surge in U.S. employment last month.
Economists will be watching closely to see whether this week’s round of economic data confirms the trend.
A report on U.S. consumer confidence levels is due out Tuesday, while new jobless figures are set for release on Thursday.
A faster growing U.S. economy can only be good news for Canada, its largest trading partner.
On Friday, Canadians will see what impact the U.S. recovery so far has had on its gross domestic product, the ultimate measure of how fast an economy is growing.
There have already been some signs that Canada is reaping the benefits.
Canada’s exports rose at an annualized rate of 7 per cent in the last three months of 2011, most of that due to stronger sales to the U.S., noted John Clinkard, chief economist with Deutsche Bank Canada. “There’s clear evidence the stronger demand is starting to have a positive impact on manufacturing in Canada,” Clinkard said in a telephone interview.
By itself, a U.S. recovery will not be enough to turbo charge Canada’s economic growth.
With a higher Canadian dollar, relative to the U.S. greenback, manufacturers have lost a lot of their price competitiveness, particularly in southern Ontario, Hodgson said
To succeed, Canada needs to become more innovative, more productive and develop a greater diversity of trading partners, Hodgson said.
With 70 per cent of Canada’s exports going to the U.S., he said, “We’re still very dependent on one market.”
And with the federal and Ontario governments both talking about cutting costs, while Canadian households feel stretched by excessive debt, domestic spending is expected to slow, Hodgson added.
Canada's growth rate slows, while U.S. goes up