At first glance, StatCan’s Labour Market survey from August paints a pretty rosy picture: Canada’s economy created 59,000 new jobs, and unemployment dropped 0.1 percentage point to 7.1%. But a more detailed look reveals some less encouraging details.
Canada’s employers continued hiring in May. The economy created 95,000 new mostly full-time jobs.And while Canada’s unemployment rate is still 0.1% higher than the 7% reached at the first months of this year, there are more Canadians working now than there have been at any time in the past 5 years.
In the late months of 2012, I started warning that the job market growth reported in Statistics Canada’s labour market surveys may be unsustainable. Our own Vicinity Jobs hiring demand research, which analyzes online job postings, showed that the numbers of new jobs advertised had fallen to levels we had not seen in years. I speculated that employers may be holding back layoffs rather than creating new jobs.
Then something interesting happened: Canada’s economy lost jobs and unemployment increased in March as I had expected – but at the same time, our own reports showed that hiring demand was starting to pick up. So I suggested that if hiring demand holds up, this may keep unemployment from increasing significantly.
The results of April’s labour market survey (released on Friday, May 10th 2013) suggest that this is now happening. Unemployment remained unchanged after the drop in April, and the economy even regained some 12,500 of the 54,500 it had lost in March. And while, on balance, the number of jobs in Canada has hardly grown since December of last year, there are some signs that better times may lie ahead.
There are two reasons for my cautious optimism regarding the short-term prospects of the job market: The state of the US economy and Canada’s hiring demand levels.
So far, at least, it appears that the US economy has been damaged less than many had feared by the tax increases that took place at the beginning of this year and by the government spending cuts that started in March (the so-called sequester). The US economy`s performance can hardly be described as “stellar”, but the mere fact that it has not gotten into a decline in spite of these drastic measures seems to vindicate those who argued that it is actually in a pretty good shape. This comes with an important caveat though: While the effect of the tax increases should be quite evident by now, the full impact of the sequester is yet to materialize. Most of the affected government agencies are only starting to cut their budgets, and layoffs and procurement changes take time to implement.
Canada’s hiring demand level also remained healthy in April. It did retreat slightly from the March levels, but this is due to seasonal trends (hiring demand is usually weaker in April than in March). Overall, April was the first month of 2013 in which hiring demand caught up with the levels from the same time last year. If this trend continues, unemployment will likely to decline.
So the question now is: Will Canada’s employers continue hiring?
Over the medium-to-long term, Canada’s structural imbalances will prevent strong economic growth. This in turn will keep a lid on hiring demand. Record high household debt (fueled in part by inflated real estate prices) means that Canadians must save more and spend less. We are already seeing the effect on the job and real estate markets, in the form of a softening real estate prices and demand and a decline in the hiring demand from retailers. This trend will continue and will likely accelerate once interest rates start to rise (which is unlikely to occur in the very near future, but cannot be avoided in the medium term).
Another issue is that the long-term prospects for Canada’s largest industry – manufacturing – remain cloudy. Manufacturing actually created 21,000 new jobs in April, but this came after a downward trend that lasted for 9 months. As a result, the number of manufacturing jobs in Canada is still 2.9% lower than it was 1 year ago. Other industries – including the oil and mining – do not have the breadth and growth potential to replace manufacturing as a source of employment and overall wealth. An improvement in the state of the US economy may give a short-term boost to Canada`s manufacturers. But over the long term, Canadian manufacturers need to become more competitive in order to survive. This requires being more productive, which in turn requires businesses to innovate faster. Many studies show that Canadian businesses lack their US counterparts when it comes to innovation. This will not turn around overnight.
On top of that, the international environment may be on a less stable footing than catches the eye. It is easy to forget that the US Federal Reserve (the US central bank) has been running its so-called QE policy for about 4 years now (QE stands for Quantative Easing). The policy involves stimulating the economy by printing and pouring into it large amounts of new money. The measure was originally meant as a short-term emergency measure to unfreeze the credit markets, but there are concerns that the US economy may hay have grown addicted to it (which is one of the reasons why the Federal Reserve has been reluctant to discontinue it). So far QE has not resulted in inflation, but economic theory teaches that it might (and likely will) at some point in the future. It is clear that QE must be withdrawn at some point, along with some of the newly printed money. It is not clear how the US economy will react to such “squeeze”. And in spite of many companies reporting record profits, sales revenues have been lagging.
So companies have been cutting cost to achieve their record profits, rather than selling more. As a result, unemployment in the US still remains at unusually high levels by historic standards.
In spite of all this, there is no denying that the economy seems to be weathering the challenges that it faces better than most analysts expected. Whether it will continue to deliver positive surprises remains to be seen.
written by Strac Ivanov, M.B.A., President of Vicinity Jobs Inc
Guest post contributed by Jane Hughes
Economists suggest that the creation of jobs associated with green energy is vital to the future success of global economies, like those in Canada. Many jobs have been brought to the forefront of the energy industry, and according to a report by the United Nations Environment Program, more than 2 million people around the world already work within the renewable energy sector.
Until March, Statistics Canada’s reports were painting a pretty rosy picture of Canada’s job market. In my blog posts from the past few months, I wondered where the employment growth was coming from. Last month, I suggested that Canada’s employers may be simply delaying layoffs to see where the economy is going. We (Vicinity Jobs) recorded a weak hiring demand levels since last October, and I predicted that unemployment will start creeping up again in the very near future unless the economy turns around. In March, Canada’s economy lost 55,000 jobs, and unemployment increased 0.2 percentage points to 7.2%.
By Strac Ivanov. M.B.A., President and Co-Founder of Vicinity Jobs
It never fails to amaze me how many employers are willing to pay close to $1,000 to post a single job on someone else’s web site, yet use technologies that make jobs advertised on their own web sites virtually “invisible” to the web. Many of them may not be even aware of the fact that the jobs they advertise on their web sites are off limits to search engines. Having your postings inaccessible to search engine crawlers means that you are missing out on a huge free opportunity to reach job seekers.
On Friday, March 8th, Statistics Canada reported that Canada’s unemployment rate remained unchanged in February at 7%. The economy created 51,000 jobs, but the increase was offset by a corresponding increase in the number of people looking for work. February was supposedly a good month for those looking for work in the hospitality industry and in the professional services industry, but a bad one for manufacturing industry workers.
How easy is it for job seekers to find information about job openings on your web site?
Many companies hide information about their job openings deep in their corporate web site structure. Candidates are often expected to go through the “About Us” page, then read about the company’s culture and why it is such a great place to work, before they get to the actual job postings.
by Strac Ivanov, president and co-founder of Vicinity Jobs Inc
After defying economic gravity for a couple of months, Canada’s job market seems to be coming back to earth.
Written by Strac Ivanov, president of Vicinity Jobs Inc
Statistics Canada latest labour market survey for 2012 is surprisingly upbeat, reporting job growth (mainly in Ontario) and an unemployment rate decrease. In fact, unemployment is now officially at its lowest level in 4 years.
The problem: These findings fly in the face of major trends reported in other key economic reports and announcements (including StatsCan’s own) from the past month. Expect a downward correction in early 2013.