Canadian Employment—What a Difference Two Years Make!

On an industry basis, job losses in manufacturing (down 142,500) have far outsized those in business, building, and other support services (down 28,200), education (down 17,100), and agriculture (down 14,200), the only other industries with job declines over a two-year period. The vast majority of these job losses are in the manufacturing heartland of Ontario (down 124,200) and Quebec (down 22,100). However, construction jobs (up 161,400) have been plentiful within the past two years. Professional, scientific, and technical services; healthcare; accommodation and food; and public administration workers are the other groups whose payrolls expanded healthily. These job gains over the past two years, combined with construction job additions, make up most of the total employment advance.

Even though construction employment is up, the stop-and-go nature of the job as workers move from one construction project to the next means that its impact on overall employment and the economy is only temporary. Although there has been a recent boom in office tower construction in Toronto, Calgary, and Vancouver, such booms do not occur on a consistent basis. For example, the large office towers under construction in downtown Toronto are the first to be built in over a decade. Eventually, building projects come to an end. We expect major construction projects in Alberta and British Columbia to near completion by 2010. Future job growth in Canada will rely less heavily on the construction industry. Ideally, a strong employment market would be marked by robust growth in the private sector.

Not All Job Losses Are Created Equally

As expected, Ontario suffered the biggest job losses in manufacturing over the past two years, followed by Quebec. The auto and forestry industries suffered the hardest blows, as evidenced by the decline in real output. Commodity-rich British Columbia and Saskatchewan also saw manufacturing payrolls fall, but at much lower levels. Both Alberta and Manitoba, on the other hand, increased their manufacturing employment. Indeed, Manitoba's solid manufacturing real GDP growth is a far cry from the hemorrhage suffered by Ontario. Nova Scotia was the other province to see a gain in manufacturing employment.

Changing the Employment Pie

The two largest employment industries, as a share of total employment, are trade and manufacturing, accounting for 15.7% and 11.4% of total jobs, respectively. Healthcare is a very close third at 11.1%, and is poised to take over manufacturing as the manufacturing industry's losses mount. Perhaps even more telling is how the shares of total employment have changed over time, specifically since 2002, when the Canadian dollar started its meteoric climb. Again, both trade and manufacturing sectors were top employers, with trade accounting for 15.7% of total employment (no real change compared with today). However, manufacturing employment was a stronger 15.0% of total employment, 3.6 percentage points higher than current levels. Since trade is relatively unchanged, what industries have gained, offsetting manufacturing's loss? Construction is responsible for almost half of the difference. Currently, construction jobs make up 7.2% of total employment. Six years ago, the share was only 5.7%, a 1.5-percentage-point jump. The remainder is dispersed throughout the services industry, namely in the public sector.

Back in 2002, the top employment industry in Alberta was trade, followed by healthcare and then manufacturing and construction. Fast forward to the present, and trade is still number one with a 15.8% share of total employment. However, construction is in second place with a 10.0% share and healthcare is in third with a 9.8% share. Manufacturing has slipped to sixth place with a 7.1% share, with professional services (8.4%) and forestry, fishing, mining, and oil/gas (7.3%) edging it out of the top five. Also losing its share of total employment is accommodation and food services, falling from 7.0% in 2002 to 5.7% in 2008. This is a big shakeup in Alberta's employment market.

Moreover, manufacturing employment is no longer the top employment industry in Ontario. There are currently 880,000 manufacturing workers—the lowest level in 13 years, and well below the long-run average of 985,000. Ontario's shrinking manufacturing sector is not a new development, but the situation is worsening. Trade is the top industry with a 15.5% share, practically unchanged from 2002. Manufacturing lost 5.1 percentage points from its share, but is in second place with 13.2%. The lost manufacturing share was transferred to the public sector, which ramped up hiring within the last year. Of the 11 employment sectors that have positive employment growth, it is encouraging to see that job growth surged in the professional, healthcare, and construction sectors, which are traditionally well-paying fields.

Although Saskatchewan's job growth is up 2.4% from two years ago, matching Ontario's, the composition of job gains is much more diverse. Of the 16 employment industries, 10 gained over the two-year period. Among the job growth industries, five have double-digit growth. Surprisingly, the largest employment sectors (trade, at 16.2% of total, and healthcare, at 13.0% of total) have seen some of the slowest increases.

Conclusion

Canada's manufacturing sector is in dire straits. From the latest peak (November 2002) to today, job losses of 375,100 are just shy of the previous 384,000 cannonball drop (from January 1989 to June 1993). And although manufacturing employment has plunged, other sectors have gained, picking up the slack. This is good news, and it is encouraging that the job advances over the past two years have been widely dispersed. With weak employment growth expected to start this year, at 1.6%, manufacturing job losses will likely worsen. Growth will likely be moderate in the services industry, and any declines in other industries will be limited.