Canada’s unemployment rate to top U.S.’s by 2014

Canadians won’t have much longer to brag about having a lower unemployment rate than the U.S.

Economists are calling for America’s level of unemployment to fall below Canada’s next year for the first time since 2008.

Canada’s unemployment rate now stands at 7.1 per cent, compared to 7.3 per cent in the U.S. A pairing of economist surveys done by Bloomberg News recently calls for Canada’s unemployment rate to average 7 per cent next year and 6.9 per cent in the U.S.

While the difference doesn’t sound like much, it’s certain to slow the rhetoric by Canadian policymakers about Canada’s stronger economy, or at least change the tone to one slightly less boastful. The Harper government has been quick to mention Canada’s post-recession job recovery rate has been faster than any other G7 nation.

Canadian investors have also been smug in recent years as they watched the housing market and banking system collapse south of the border. While some U.S. investors are now betting Canada is next, shorting their investments in this country, economists here at home continue to defend our economy.

BMO Capital Markets economist Douglas doesn’t buy the argument that the driver behind a falling U.S. unemployment rate is the country’s steadily recovering economy.

“This so-called improvement in the U.S. rate comes with a huge asterisk — it is coming down partly because people are leaving the U.S. workforce in droves, not because of a fundamental improvement,” Porter says.

He says the U.S. participation rate - defined as the share of the adult population with a job or looking for one - has dropped to its lowest level since the late 1970s.

“Not even close to that case in Canada,” he says.

Flip things over and Porter notes the employment rate – those that are working - in Canada is 62 per cent - about 3 percentage points higher than in the U.S. at 59 per cent.

Both were at 63 per cent before the recession, he notes.

“So, whatever the unemployment rate would say, there is little doubt Canada’s job market is still much, much healthier than in the U.S.”

Canada’s jobless rate advantage versus the U.S. was as large as 2.2 percentage points in November 2010, says Bloomberg News.

Before 2008, Bloomberg says last time Canada had lower unemployment in any month was August 1981, when Pierre Trudeau was prime minister and Ronald Reagan was president.

The Bloomberg economist surveys -- done the week of Sep. 6 -- forecast the U.S. jobless rate will fall further than Canada’s in 2015. The 15 economists surveyed said they believe inflation will grow to 1.8 per cent in 2014, up from from 1.1 per cent this year. Both are still below the Bank of Canada’s 2 per cent target.