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Chapter 5

“Job growth continues to boom in Jan”- National Post, February 9, 2007, Financial Post

http://www.canada.com/nationalpost/financialpost/story.html?id=e51077e3-ce8c-4cb2-8cff-33fe2394a059&k=25157

Summary

Based on GDP numbers, Paul Ferley, an assistant chief economist with BMO Capital Markets, concluded that Canada has a very perplexing puzzle at hand. The lack of GDP growth in relation to the amplified hiring rates conflict with each other. In Canada, it seems as though we have found a job for nearly everyone, but have no economic output to show it. A record high of 63.4% of people employed was reported in January. This was due to an 89,0000 increase of people employed. Even the previous month had experienced high employment numbers of 52,000 new employees.

All of these increases in employment are mostly credited to the economical strength of British Columbia and Alberta. In contrast to the increase in employment, our economic out-put experienced a small growth of 0.2 %. Economist predicted that the next quarter’s growth would be less than 1.0 %, which is quite a bit lower than what the Bank of Canada’s forecast of 1.5 %. According to David Wolf, a Canadian economist, the confusing conundrum is a result of a weak labour market, a productivity level that is “absolutely terrible”, faulty growth readings, or a combination of any of the three. A task force was set up last week to investigate this matter further. They are expected to wield results in the next month. It looks as though the Canadian economy has stalled in motion for the time being.

Relationship and Reflection

In this chapter, we learned that GDP is usually a great indicator that reflects the standard of living in Canada. An increase in GDP would represent an increase of goods and services produced, which in return contributes to Canadian incomes rising. When GDP is expected to decline, or slow down, many business cut costs, and in most situations, they cut back on employee expenditures. In this case, it is an obvious contradiction to this rubric. In our economy, GDP and employment are tightly knitted. As GDP falls, so does employment. However, job growth Canadians experienced this January proves that this is not the case. Regardless of the confusion, there could be many reasons for this occurrence. Although there has been an employment growth throughout the country, the two western provinces has out-shined the rest of them. Alberta recently experienced an oil boom, which could have masked the data. Because of the oil boom, Alberta wages were not affected by the import prices, but grew instead. They were also in need of labour, so they hired young people with little education who weren’t that productive. Other factors that might have lead to the confusion are the difficulty in measuring out-put or productivity, especially in certain sectors such as health care and education. The new employment levels are not likely to be sustained as the GDP growth is slowing.

posted by Tiffany King @ 12:26 AM