Oil companies across Canada have been slashing their budgets. In previous months, those cuts have not showed up in Canadian unemployment numbers, but today's job numbers offer a new window on the state of the U.S. and Canadian economies.
The numbers were a surprise to the upside, with Canada's economy adding 35,000 jobs during the month — much better than the 5,000 jobs that economists had been expecting.
Jobless figures give unemployed people an update on their prospects for finding work, but labour force statistics do a lot more than that.
Along with growth figures (GDP), inflation and net trade, unemployment is one of the key indicators of a country's economic health. Jobs stats are especially valuable because they are so fresh. As Statistics Canada says, its Labour Force Survey is "among the most timely and important measures of performance of the Canadian economy."
While other statistics can take months to collate, Statistics Canada and the U.S. Bureau of Labor Statistics have a tried-and-true system of surveys to compile employment numbers only days after the month has ended.
And while everyone has been predicting a recovery in the United States, there have been increasing worries that U.S. growth will be hurt by the perilous state of the rest of the world.
"While the recovery in the U.S. economy has helped to drive global growth, the rest of the world cannot depend on the United States to be the sole engine of growth," U.S. Treasury Secretary Jacob Lew testified to Congress this week. January's U.S. jobless numbers will be a test of whether Lew's concerns are justified.
In an attempt to reinvigorate their own industries and exports, countries around the world have been cutting interest rates. One of those countries is Canada.
Here, one of the things economists have been watching most closely is to what extent the a 50 per cent-plus crash in the world price of petroleum will hurt Canadian jobs and the economy more generally. This week, some house price numbers from Alberta seemed to indicate the Alberta economy was beginning to feel the pinch of an oil contraction.
However, the slashing of capital expansion and exploration budgets doesn't take effect immediately. Also mitigating the damage has been the tumbling Canadian dollar. While labour costs have declined with the loonie, oil prices are still set in U.S. dollars, giving Canadian producers a relative advantage.
The other thing to watch is to what degree weakness in the petroleum sector affects other sectors of the economy. Statistics Canada's Labour Force Survey breaks down its figures by industry and region.
The job numbers Friday gave a hint that Alberta's economy was weathering the slowdown better than we thought, as the province still managed to add 14,000 jobs.
That makes sense because even in Alberta, large swathes of the economy have nothing to do with oil exploration proper. As mentioned before, oil processing and transport will actually be helped by falling prices and a lower loonie.
In the rest of Canada lower oil prices should actually stimulate job creation. As the recent Economist article Canada's Economy: Beyond Petroleum, pointed out, "production of crude oil represents just 3% of Canada’s GDP." In the eastern half of the country, Canada is a net importer of oil. Now that oil only costs half as much.
Investors and bankers will also be studying these latest numbers for signs of whether Bank of Canada Governor Stephen Poloz was justified in his recent cut in rates, and whether he is likely to cut again.