March 2011 was largely dominated by bad news for the economy: Most notably the earthquake and tsunami in Japan and the deepening of the Libyan conflict. The disaster in Japan hit Canada’s local economy by disrupting the supply chains of local manufacturers. In Ontario, the impact on the automotive sector was particularly severe. The Honda plant in Alliston, for example, cut production by more than 50% indefinitely, apparently because the Japanese disaster made it impossible for it to source electrical parts that go into vehicles it assembles. The Libyan crisis also lead to some (potential as well as real) disruptions in the oil supply. Employers typically respond to such signs of uncertainty by placing hiring decision on the backburner until the future becomes more clear (and brighter). So it was quite refreshing to see that Canada’s job market did actually quite well in March.
Employment levels did not change much overall, even though unemployment in Canada dropped to 7.7% (indicating that less people were looking for work in March than in February). But losses of 92,000 part-time jobs offset the creation of 91,000 new full-time jobs. So overall, whereas the total number of workers in Canada did not change much, the number of hours worked increased. In addition, it was refreshing to see that the jobs that were created were in the private sector, whereas employment losses were mostly in the public sector.
Another good sign was that hiring demand seems to have increased – indicating that there is a strong chance that employment might grow in the months to come. The Vicinity Jobs hiring index for York Region, Ontario, for example, hit its highest level since the market downturn in 2008, and the gains were dominated by the traditionally higher value-added jobs in the professional, scientific, and technical services industries. Manufacturers, on the other hand, are still struggling to create new jobs. But this was largely to be expected, due to the impact of the Japanese tsunami disaster and the increasing uncertainty surrounding energy prices.
Yet uncertainty should not be underestimated. According to research done by Nicholas Bloom from Stanford University (and quoted in a recent article in The Economist magazine), industrial production typically drops by 1% in the first months after an uncertainty shock, similar to those caused by the Japanese disaster and the Lebanese crisis (although he did also find that it also rebounds sharply after the shock is over). This is equivalent to the impact of a seven percentage-point increase in interest rates. The uncertainty persists, although its sources seem to change: In the first half of April, Portugal (after Ireland and Greece) announced that it too is in need of financial bail out by stronger EU economies, confirming fears that the European sovereign debt crisis is far from over. Recently released house market statistics from the United States also point that the mortgage crisis there is far from over, as it is becoming more and more obvious that tackling the country’s fiscal deficit will not be possible without significant sacrifices. And let’s not forget that the US Federal Reserve recently completed a couple of rounds of Quantitative Easing (essentially flooding the market with newly printed money) – a measure that was largely expected to have some positive impact in the short term, but creates significant medium-to-long term risks. So, overall, the job market will likely remain volatile in the months to come.
The full Statistics Canada report can be found at the following link: