Canada’s jobless rate will be higher than the U.S. in 2014 according to a Bloomberg News economist survey, ending a five-year advantage touted by policy makers as evidence of the country’s stronger economy.
Unemployment in Canada will average 7 percent next year according to the median estimate in a survey with 15 responses gathered from Sept. 6 to Sept. 11, while a separate survey about the U.S. economy forecasts a 6.9 percent jobless rate.
Canada’s employment growth this year is on track to be the slowest since 2001, outside of the last recession, as manufacturers and governments fire workers to cut costs. The U.S. is now tapping pent-up demand after a much deeper slump while Canadian consumers curb record debts and struggling exporters delay investments.
“Canada was able to outperform the U.S. during the recession and the recovery but now it’s payback time,” said Benjamin Tal, deputy chief economist at Canadian Imperial Bank of Commerce in Toronto, by telephone.
Unemployment has been lower in Canada since October 2008 on a monthly basis, according to figures from Statistics Canada and the U.S. Labor Department. While the advantage was as large as 2.2 percentage points in November 2010, it has narrowed to 0.2 points in August with Canada’s rate at 7.1 percent and the U.S. at 7.3 percent.
Before 2008, the last time Canada had lower unemployment in any month was August 1981, when Pierre Trudeau was prime minister and Ronald Reagan was president.
“It is an important symbolic event if Canada’s unemployment rate exceeds the U.S. rate,” said Erin Weir, an economist at the United Steelworkers union in Toronto. “There has been this idea that Canada is dramatically outperforming the U.S. and we may well be seeing the end of that.”
Harper has touted the country’s labor market, saying the country has recovered jobs lost in the global recession faster than any other Group of Seven country including the U.S. Earlier this week, Finance Minister Jim Flaherty froze employment insurance premiums for three years to aid future job creation.
The world’s 11th-largest economy still needs to add more than 22,000 jobs a month for the rest of 2013 to avoid suffering the weakest annual gain since 2001, except for the recession years of 2008-2009 according to Bloomberg calculations using Statistics Canada data.
The surveys also forecast that the U.S. jobless rate will fall further than Canada’s in 2015. Inflation will quicken to 1.8 percent next year from 1.1 percent this year, remaining below the Bank of Canada’s 2 percent target.
Canada will benefit from a recovery in the U.S., which buys three-quarters of Canada’s exports, Weir said.
“Canadians should be quite happy to see the American job market recover,” he said. “We should certainly wish Canada’s job market was doing better.”