US Jobs Numbers Poor for March 2015; Effects on Ontario

The US jobs numbers for March came out on Friday (Canada's numbers won't come out until next Friday and not due to the holiday; those should be interesting). At only 126,000 it was a really weak number and the weakest number for about a year. Certainly bad weather in the Northeast could be blamed for a bad February number, but I don't think there are too many weather effects for March.

Adding to March's weak numbers, the January and February numbers were reduced by 69,000 jobs meaning the overall first quarter for the US isn't looking good. The Atlanta fed has a prediction that the growth for US GDP will be zero in the first quarter.

So what's this mean for Ontario? Surly Hamiltonian has been annoyed by the Canadian media meme that with the low dollar and low oil prices, suddenly Ontario is going to kick ass after sucking economically (by GDP measures) since basically the Harris years. Even Kathleen Wynne has been pumping that story. The problem is that there's not a lot of evidence of this new economic strength lately. To be fair, the second and third quarters of 2014 were strong for Ontario (4.0% and 3.2% annualized respectively), however that was after a really weak first quarter GDP number (0.6%) in 2014. The fourth quarter number hasn't been announced yet, but I don't think it will be as strong as the second and third quarter numbers.

What about this first quarter that just finished? A lot of media had been claiming that with strong US growth that should spill over into Ontario. However with first quarter growth in the US weak that obviously is going to have an effect on Ontario and one can't argue that there is 4.0% growth in the US anymore. Plus there is the real possibility that the US could be weak all the rest of 2015 with the knock on effects in Ontario.

Of course one could argue that even with weak US growth, with the dollar down so much versus the American dollar, that Ontario should do well. However all the manufacturing numbers I've seen haven't been particularly good lately. Ontario doesn't make as many cars as we used to and there's not a lot of evidence that that is suddenly going to change because of the dollar (the Mexican peso hasn't been doing so hot lately either, plus autoworker salaries are a lot less in Puebla than in Oshawa). With the low dollar, less Ontarians will go shopping across the border or go on foreign holidays so there should be some boost to GDP there as more money is kept in the province.

Surly Hamiltonian has argued that Ontario is basically a low wage service sector economy now with a very strong housing component, with little productivity growth and what GDP growth there is is basically from population growth of around 1.1% per year mainly fueled by immigration. So one shouldn't really expect much in the way of GDP growth in this era. No matter how badly Alberta is doing. 

Canadian Fourth Quarter 2014 GDP Rises 2.4%, 2.0% Expected, Inventories Up

Statscan just announced that Canadian GDP rose 2.4% (annualized) where 2.0% was expected. For comparison Statscan says US growth was 2.2%. Inventories were a big contributor (which could be a drag in Q1). For all of 2014, the increase was a relatively strong 2.5%. Third quarter growth was 3.2%.

Exports were actually down 0.4%, well exports of goods were down 0.6% which probably isn't good for Ontario especially this from the Statscan report:

"Exports of motor vehicles and parts (-3.5%) and energy products (-1.3%) were notably lower. Metal and non-metallic mineral products grew 5.4%."

Interesting with the current developments that car related exports were down even more than energy products.

Savings were down in 2014:

"Household disposable income (in current dollars) grew 3.4%, the slowest pace in five years. As a result, the household saving rate declined from 5.2% in 2013 to 4.0% in 2014."

One wonders how much longer Canadians can continue to pay more for housing.

For Ontario overall, considering the fact car exports were down more than energy products, it is possible that Ontario's GDP could come under the national 2.4%. Employment numbers certainly weren't impressive in the fourth quarter. However as mentioned, inventories were way up, so who knows. Ontario's first quarter growth could be poor.