Job growth in services and resources offset losses in manufacturing
TORONTO - It's a trend that has been reinforced in each month's jobless report and hit home last week when Chrysler Canada revealed it would chop an Ontario assembly shift, putting another 1,100 workers out of a job in the province's battered manufacturing sector.
Despite impressive job growth and the lowest unemployment rate in more than three decades, Canada's booming economy is firing on only five of six cylinders. Yet, it's still delivering enough horsepower to push the unemployment rate down to 5.8 per cent and the loonie to record highs.
However, the prospects are for much more difficult times ahead as the earnings squeeze in Corporate Canada puts downward pressure on private sector job growth into 2008.
In recent years, the energy, resources and services sectors have been on fire, especially in the oil-rich West, where high demand is driving up wages and income. Yet, layoffs are starting in the the natural gas sector because of low prices and weakened drilling numbers.
Meanwhile, manufacturing remains under siege, especially in automotive, forestry and textiles industries. The pain that began with restructuring in the auto sector and slumping demand in U.S. housing, has worsened because the soaring loonie is squeezing exports significantly.
Blue-collar unions call for government support and an industrial policy to deal with the erosion in manufacturing, but the economic shift in Canada mirrors changes in all western industrial countries, as their economies move towards services and goods production shifts to low-wage countries in Asia, Latin America and elsewhere.
In Canada, that shift has been painful in Ontario and Quebec's manufacturing sector, but appears to be offset by a boom in jobs in energy, mining, financial services, health care and education.
Overall, job growth continues in every province, pushing up consumer spending. Meanwhile, provincial governments are putting billions of dollars back into education and health care, creating thousands of new jobs every month.
In last week's mini-budget, the federal Conservative government noted that more than 280,000 jobs were created in Canada so far this year. That's almost as much as the manufacturing sector has lost in the last five years.
The economic statement noted that since 2005, when the rising dollar began to hit exporters hard, manufacturing output has shrunk by three per cent with a loss of 130,000 jobs.
But at the same time, financial services grew by more than 10 per cent, construction by nine per cent and retail trade by eight per cent.
"Certainly we've seen in the large developed economies like Canada, a shift from manufacturing to service," Finance Minister Jim Flaherty said after a speech in Toronto last week. "This is always a matter of degree. That's why when you look at the Ontario numbers, you see strong employment numbers . . . even though Ontario and Quebec are the major places for manufacturing industries in Canada. We're seeing significant job gains for example in the financial services sector . ./ . with relatively well-paying jobs. Regrettably, some Canadians are losing their jobs in the manufacturing sector. The good news is, they are able to obtain jobs in other sectors."
Doug Porter of BMO Capital Markets says as the economy changes, growth in services offsets troubles in manufacturing, even in Ontario and Quebec, where job growth continues despite the manufacturing weakness.
"I don't want to downplay the Chrysler announcement," Porter said. "We're talking a little more than 1,000 jobs. Ontario just created 32,000 jobs last month.
"And they aren't all McJobs by any means. People tend to downplay the public sector or service sector jobs but a lot of these jobs can be relatively high skilled, high paying and stable. From a consumer spending standpoint, those jobs count every bit as much as a manufacturing job."
Buzz Hargrove, head of the Canadian Auto Workers union, says the strong job-creation growth data "hides a really soft underbelly, especially in Ontario and Quebec."
"It's something that concerns me as a person that's dealt with manufacturing all my life that we can't turn over the economy and somehow think that financial services or the oilpatch are going to solve the problems of Canadians," he said in an interview after meeting with Industry Minister Jim Prentice in Ottawa.
"We can't all move to Alberta. They don't have the infrastructure to get us there to start with, let alone look after us after we get there."
Ted Carmichael, chief economist with JPMorgan Chase Canada, questions whether the employment gains seen in September (51,000) and October (63,000) are providing an accurate picture of the strength of the economy.
Of the 137,000 jobs added in the last three months, 126,000 have been in the public sector, primarily education, health care and government work," he said in a research note. At the same time, private sector employment has dropped by 12,000 and self employment has risen by 28,000.
"In past economic downturns, private sector employment has been a better guide to the direction of the economy than total employment," he said. "In the 1981-82 recession cycle, both private and public sector employment turned down at the onset of recession in June 1981. In the 1990-91 recession cycle, private sector employment turned down at the onset of recession in March 1990, but public sector employment had another growth spurt into July of 1990, but this only sowed confusion about what was really happening to the economy."
JPMorgan forecasts that job growth will slow sharply over the next six months, with inflation falling below two per cent, and it believes the Bank of Canada will cut interest rates to pull down the value of the soaring loonie.
"In the current cycle, private sector employment growth has already weakened sharply since the (dollar) began its rapid ascent last spring," Carmichael says. "Meanwhile, public sector employment has continued to surge as governments have enjoyed healthy fiscal balances and provincial elections have boosted temporary employment.
"A severe profit squeeze, triggered in large part by CAD strength, has developed in the private sector that will put further downward pressure on private sector employment in the months ahead."
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Despite impressive job growth and the lowest unemployment rate in more than three decades, Canada's booming economy is firing on only five of six cylinders. Yet, it's still delivering enough horsepower to push the unemployment rate down to 5.8 per cent and the loonie to record highs.
However, the prospects are for much more difficult times ahead as the earnings squeeze in Corporate Canada puts downward pressure on private sector job growth into 2008.
In recent years, the energy, resources and services sectors have been on fire, especially in the oil-rich West, where high demand is driving up wages and income. Yet, layoffs are starting in the the natural gas sector because of low prices and weakened drilling numbers.
Meanwhile, manufacturing remains under siege, especially in automotive, forestry and textiles industries. The pain that began with restructuring in the auto sector and slumping demand in U.S. housing, has worsened because the soaring loonie is squeezing exports significantly.
Blue-collar unions call for government support and an industrial policy to deal with the erosion in manufacturing, but the economic shift in Canada mirrors changes in all western industrial countries, as their economies move towards services and goods production shifts to low-wage countries in Asia, Latin America and elsewhere.
In Canada, that shift has been painful in Ontario and Quebec's manufacturing sector, but appears to be offset by a boom in jobs in energy, mining, financial services, health care and education.
Overall, job growth continues in every province, pushing up consumer spending. Meanwhile, provincial governments are putting billions of dollars back into education and health care, creating thousands of new jobs every month.
In last week's mini-budget, the federal Conservative government noted that more than 280,000 jobs were created in Canada so far this year. That's almost as much as the manufacturing sector has lost in the last five years.
The economic statement noted that since 2005, when the rising dollar began to hit exporters hard, manufacturing output has shrunk by three per cent with a loss of 130,000 jobs.
But at the same time, financial services grew by more than 10 per cent, construction by nine per cent and retail trade by eight per cent.
"Certainly we've seen in the large developed economies like Canada, a shift from manufacturing to service," Finance Minister Jim Flaherty said after a speech in Toronto last week. "This is always a matter of degree. That's why when you look at the Ontario numbers, you see strong employment numbers . . . even though Ontario and Quebec are the major places for manufacturing industries in Canada. We're seeing significant job gains for example in the financial services sector . ./ . with relatively well-paying jobs. Regrettably, some Canadians are losing their jobs in the manufacturing sector. The good news is, they are able to obtain jobs in other sectors."
Doug Porter of BMO Capital Markets says as the economy changes, growth in services offsets troubles in manufacturing, even in Ontario and Quebec, where job growth continues despite the manufacturing weakness.
"I don't want to downplay the Chrysler announcement," Porter said. "We're talking a little more than 1,000 jobs. Ontario just created 32,000 jobs last month.
"And they aren't all McJobs by any means. People tend to downplay the public sector or service sector jobs but a lot of these jobs can be relatively high skilled, high paying and stable. From a consumer spending standpoint, those jobs count every bit as much as a manufacturing job."
Buzz Hargrove, head of the Canadian Auto Workers union, says the strong job-creation growth data "hides a really soft underbelly, especially in Ontario and Quebec."
"It's something that concerns me as a person that's dealt with manufacturing all my life that we can't turn over the economy and somehow think that financial services or the oilpatch are going to solve the problems of Canadians," he said in an interview after meeting with Industry Minister Jim Prentice in Ottawa.
"We can't all move to Alberta. They don't have the infrastructure to get us there to start with, let alone look after us after we get there."
Ted Carmichael, chief economist with JPMorgan Chase Canada, questions whether the employment gains seen in September (51,000) and October (63,000) are providing an accurate picture of the strength of the economy.
Of the 137,000 jobs added in the last three months, 126,000 have been in the public sector, primarily education, health care and government work," he said in a research note. At the same time, private sector employment has dropped by 12,000 and self employment has risen by 28,000.
"In past economic downturns, private sector employment has been a better guide to the direction of the economy than total employment," he said. "In the 1981-82 recession cycle, both private and public sector employment turned down at the onset of recession in June 1981. In the 1990-91 recession cycle, private sector employment turned down at the onset of recession in March 1990, but public sector employment had another growth spurt into July of 1990, but this only sowed confusion about what was really happening to the economy."
JPMorgan forecasts that job growth will slow sharply over the next six months, with inflation falling below two per cent, and it believes the Bank of Canada will cut interest rates to pull down the value of the soaring loonie.
"In the current cycle, private sector employment growth has already weakened sharply since the (dollar) began its rapid ascent last spring," Carmichael says. "Meanwhile, public sector employment has continued to surge as governments have enjoyed healthy fiscal balances and provincial elections have boosted temporary employment.
"A severe profit squeeze, triggered in large part by CAD strength, has developed in the private sector that will put further downward pressure on private sector employment in the months ahead."
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