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July’s Canadian Job Losses Unlikely to Spell Out a Long-Term Trend

On the face of it, the July unemployment numbers released by Statistics Canada on August 6, 2010 look quite disappointing: Unemployment increased across Canada, growing from 7.9% to 8%. The only bright spot really seemed to be Western Canada (whose economy is strongly dependant on the resource industries and on the commodity market trends). Unemployment in BC dipped 0.3 percentage points from 7.8% to 7.5%. However, hiring demand that that gathers suggests that the worsening is unlikely to persist – at least in the Greater Toronto Area.

Overall, Ontario’s unemployment rose 0.2 percentage points to 8.5%. However, this comes on the heels of relatively strong employment gains in July. The BC numbers also need to be put into perspective: The “good news” from July merely offset the unemployment rate increase that we saw in BC in June (when unemployment went the opposite direction – from 7.5% to 7.8%).

Since the early days of the of 2009 recession, we have been reporting that we expect employment growth to remain sluggish and mired in uncertainty for some time to come, and Canada’s job market to undergo some not-so-pleasant structural changes (such as replacing manufacturing jobs with traditionally lower-paid retail and service jobs).   This is exactly what we are seeing now, even as the economy is starting to recover.

There are still no indications, however, that Canada’s economy may be falling back into a recession. The Conference Board of Canada (an influential think-tank) maintains its expectation that Canada will “weather the global recession better than most of its peers” and that its GDP will grow by more than that of most other industrialized countries (See full report here: ). Hiring demand data that we gather also reinforces our measured optimism. We saw refreshingly high hiring demand levels in most municipalities that we serve. In Ontario’s York Region (the northern section of the GTA), we recorded the best hiring demand levels since the job market first went into a freefall back in November of 2008 – almost 2 years ago.

So if hiring demand is high, how could it be that unemployment is increasing? Hiring demand is a forward-looking indicator that provides some sense of how many job openings employers are looking to fill. Since there is often a gap of somewhere between 1 and 2 months between the time an employer advertises a job and the time the job gets filled, today’s higher hiring demand levels point to job creation in the future. This makes the situation very different from the one we saw during most of last year, when unemployment was growing and hiring demand was staying low – giving those who had lost their jobs little hope of finding work. There are 15% to 20% more job opportunities now than there were a year ago, so those who are unemployed stand better chances today than they did a year ago.

But what about the quality of the jobs that are advertised? Well, this is the part that gives us some reasons for concern. We recorded an unusually high share of postings for retail and service jobs (which traditionally pay low wages and are more likely to be part-time positions). Also, almost a quarter of all hiring demand in York Region (the only area where we currently analyze hiring demand by industry) was in the retail industry. It’s worth noting, however, hiring demand in two other major industries – Manufacturing and Professional / Scientific / Technical services – remained fairly strong as well.

Statistics Canada also reports that there was a significant decline in the number of full time jobs (139,000 full-time jobs lost in July across Canada) partly offset by part-time job gains (130,000 new part-time jobs). This is somewhat worrying, because, obviously, part-time jobs are by definition worse jobs than full-time ones. However, if hiring demand levels remain strong, we should see a strengthening in the creation of full-time jobs in the months to come as well.

Overall, while the Statistics Canada report does not paint a very pretty picture of the Canadian job market, we don’t see serious reasons to worry quite yet. In Ontario’s   Greater Toronto Area at least, we see a strong possibility that employment will increase in the coming months.