Uncertainty hangs thick over Canada’s job market this year
Unfortunately for job seekers, it’s an employer’s market this year and they’re not exactly rolling out the welcome mat.
With an economy that’s edging nervously closer to recession amid an economic shock triggered by collapsing oil prices, many employers are retrenching into wait-and-see mode, experts say.
That helps explain why part-time and self-employed jobs are again on the rise – some folks are taking whatever they can find, or simply creating jobs from thin air as they wait for real work.
“Job seekers will have to wait until 2016 before more solid employment opportunities arise,” economists at the Conference Board of Canada said in their latest outlook this month.
“This is only the beginning. As energy producers cut back on investment this year, there will be ripple effects throughout the entire economy, eventually hitting the construction sector and other services that depend heavily on the oil and gas sector for business,” David Madani at Toronto-based Capital Economics said Feb. 6.
Layoffs will outpace hiring over the next several months, according to the Conference Board, with the jobless rate expected to climb three-tenths of a percentage point to 6.9 per cent by the early summer as resource jobs are shed not just in Alberta, but Saskatchewan, Newfoundland and elsewhere.
Policy makers at the Bank of Canada are holding out hope that a sinking loonie will spell relief in the form of job gains in Ontario and Central Canada, where manufacturers will benefit from a lower currency.
That may be a false promise, many say.
Limited horsepower in Ontario
Ontario’s much-touted – or rather hoped for – industrial rebound won’t materialize in the kind of meaningful way that could offset the employment and economic destruction out West, experts suggest. At least not this year.
Much of the physical plant that existed at the start of the 2000s has either up and vanished or is increasingly a relic of a bygone age, Rafael Gomez, economist and labour relations professor at the University of Toronto, said. “The sector doesn’t drive the employment growth it used to,” Gomez said.
For jobs to arrive in abundance, growth would have to surge. “If you have a high-growth economy, we’re talking growth of not a meagre one percent or even two, but like four, then you might generate enough firms that are new and growing and would be hiring,” Gomez said.
“That’s the only way we’re going to see a turnaround in employment numbers in that sector; is if growth basically tripled from its current rates. And it’s not going to.”
The Conference Board expects Canada’s economy to grow 1.9 per cent this year, half a percentage point lower than the researcher forecast in September.
Conference Board economist Matthew Stewart says vacancy rates for commercial and industrial properties in Ontario and Quebec were actually rising at the end of last year – a troubling sign that business investment hasn’t taken the first step in filling the gap left by receding oil prices.
“We’ve seen no pickup in investment yet,” Stewart said. “There hasn’t been any sign that it’s taking hold. Unless [Central Canada] starts attracting more investment, we’re not going to see a big pick up in the number of jobs.”
Risk of recession?
Also hovering ominously over the labour market is a looming plunge in business profits. And when profits fall, employment levels are lucky to remain in place let alone rise.
The Bank of Canada Commodity Price Index, which tracks the price of oil and other commodities, has fallen by an eye-popping 36 per cent in recent months. There’s a well-established correlation between the bank’s index and business profits, given the Canadian private sector’s heavy reliance on resource income.
Caught in something of a Wiley E. Coyote moment seconds before the plunge, business profits haven’t dropped yet (see chart).
But they’re starting to. Energy firms like Cenovus have begun reporting steep losses while non-energy firms have started to feel the bite, too. Manulife, Canada’s biggest insurer, said last week earnings were cut in half in the latest quarter.
“Unless oil prices rebound more substantially soon, that could reduce profits by as much as 30 per cent,” Capital Economics said. “On that basis, investment would decline sharply.” Including in people.Click here to view data »
“If investment were to decline by 10 per cent before year end, that would spell trouble, possible even recession,” said Madani, who believes the economy has a 30 per cent likelihood of contracting this year.
“Thankfully, there are some positive factors working in the opposite direction that partly mitigate the risk of recession. The improving U.S. economy and lower Canadian dollar should aid exporters, supporting investment in certain sectors other than energy.”
But that brings us back to the export story and Ontario.
“Our existing firms will do better, for sure. Their profits might go up. And they might hire a few more workers,” Prof. Gomez said.
But consider the auto industry. A lower dollar might help improve Ontario’s declining share of investment, but investment–a good chunk of which comes from taxpayer subsidies–doesn’t produce many new jobs. Rather, it funds technological advancements like automated assembly lines.
“Every year we’ve been subsidizing the big auto manufacturers, they’ve been shedding jobs. Every year. Whether they’ve been making profits or not,” Gomez said.
The darkening employment outlook comes amid a debate between governments. Ottawa is at odds with the provinces at the moment about whether or not more effort (and money) should be allocated toward upgrading the nation’s public infrastructure, which aside from recession-fighting stimulus projects between 2008 and 2010, has been neglected, experts say.
At a meeting with Finance Minister Joe Oliver last month, provincial premiers including Ontario’s Kathleen Wynne were pushing for billions of dollars in federal funds to be plowed into public works — a move that would spark job growth across the country.
The premiers received an economic briefing from Kevin Lynch, a vice chair at BMO Financial Group. Chief among Lynch’s recommendations was the need for “accelerated investments in infrastructure.”
Oliver said he’s not prepared to fund a deeper commitment to public works, wary of taking steps that could disrupt the Conservatives’ goal of producing federal surpluses.
“This is precisely the wrong time to launch a massive deficit program that would undermine investor confidence, erode our credit standing, weaken our ability to withstand further international shocks, add to our debt burden, reduce our ability to support social programs and burden our children with our expenditures,” the minister said in a Jan. 30 statement.
A political fight looms, experts say. Meanwhile more dire challenges will confront many Canadians in the months ahead: the fight for a living, to make mortgage payments and keep food on the table.
“You have a low-growth economy, you’re going to have low employment growth, especially for newcomers,” Prof. Gomez said. “That means any person graduating school, any immigrant or anyone who loses their job, it’s going to be tough out there.”
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