Canada’s Labour Market Puts in a Strong Performance In 2012

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Canada’s labour market ended 2012 on a high note, with almost 40,000 net new jobs created in the month of December. The fourth quarter was particularly robust, churning out more than 100,000 new positions. This is impressive considering all the negative sentiment and risks prevailing in the global economic landscape. The recent strength in the labour market was also surprising given the modest economic expansion — real GDP growth is tracking a mere 1.2 per cent in the fourth quarter of 2012.

For 2012 as a whole, employment in Canada was up 311,900 from a year ago. It is worth noting that 98 per cent of the net new jobs created in 2012 were full-time positions.

The private sector accounted for more than three-quarters of the new jobs created in 2012 — 242,000 positions in total. Public sector hiring expanded by 92,300. The ranks of the self-employed shrank by 22,400. Fifteen per cent of employed Canadians (about 2.6 million) were self-employed at the end of 2012.

Solid job growth drove the jobless rate to its lowest level in four years. The national unemployment rate sat at 7.1 per cent in December 2012, down from 7.5 per cent a year ago. The unemployment rate averaged 7.3 per cent through the year, down from 7.5 per cent in 2011.

Average hourly wages for permanent workers rose at a faster clip in 2012 (2.9 per cent) compared to 2011 (2.1 per cent).

Beneath the headlines there is considerable variation in labour market performance by demographic group, sector and region.

Still Modest Slack in Labour Market

Canada recovered all of the jobs lost through the downturn as of early 2011. With a relatively quick recovery in employment, much of the slack in the labour market following the 2009 recession has been taken up; however, based on a number of indicators some slack remained in 2012.

The unemployment rate, at 7.1 per cent in December 2012, was still higher than the 5.9 per cent pre-recession low touched in February 2008.

As of September 2012 (the most recent data available at the time of writing), there were 267,000 job vacancies among Canadian businesses. For every job vacancy, there were 5.3 unemployed people, down from 5.7 in September 2011, suggesting that businesses were finding it more difficult in September 2012 than a year ago to fill new or replacement positions. However, results by province reveal concentrated areas of labour market weakness. There was more slack in labour markets in Atlantic Canada compared to other regions of the country. In Newfoundland and Labrador, there were 11.2 unemployed people for every job vacancy, in Nova Scotia 9.6, in New Brunswick 8.5, and in Prince Edward Island 8.2. In Central Canada — Ontario and Quebec — the ratio was 7.2 and 6.6, respectively.

Labour market conditions were tighter in western Canada. The Prairie Provinces (Alberta, Saskatchewan and Manitoba) accounted for 12 per cent of all unemployed people in Canada but 32 per cent of all job vacancies. As a result, the unemployment-to-job vacancy ratio was the lowest in the country. In Alberta, for example, there were 1.7 unemployed Canadians for every job vacancy, down from 2.8 in September 2011. In Saskatchewan there were 2.1 unemployed people per vacancy, and in Manitoba 3.5. The unemployment-to-job vacancy ratio in British Columbia stood at 5.2, pretty much in line with the national average.

On a sectoral basis, tight labour market conditions prevailed in a number of industries. Health care and social assistance had the lowest unemployment-to-job vacancy ratio (1.1) followed by finance and insurance (1.6) and by wholesale trade (1.9). By comparison, in the manufacturing sector there were 4.9 unemployed people for every job vacancy, and in forestry and logging there were 9.2 unemployed people per vacancy.

Fewer businesses reported labour shortages in the final quarter of 2012. According to the Bank of Canada’s Business Outlook Survey, 25 per cent of firms responded “yes” to the question, “Does your firm face any shortages of labour that restrict your ability to meet demand?” This was down from 33 per cent of business that indicated “yes” in the third quarter of 2012 and down from 29 per cent that indicated they faced labour shortages in the fourth quarter of 2011.

Firms located in Central and Eastern Canada reported fewer labour shortages in the final months of 2012.

The duration of unemployment also remained above its pre-recession average.  As of December 2012, the average spell of unemployment lasted 21.3 weeks, down slightly from 22.4 weeks in December 2011.

Older Workers Outperform

The unemployment rate for men stood at 7.5 per cent at the end of 2012, down from 8.0 per cent in December 2011. The unemployment rate among women also fell — from 6.9 per cent to 6.7 per cent over the same time period.

Older workers (55 and over) saw their unemployment rate drop from 6.6 per cent to 6.0 percent, with the unemployment rate falling to 6.3 per cent among men and 5.5 per cent among women. Older women had the lowest jobless rate among all groups. Canadians are living longer, healthier lives than ever before and they have valuable knowledge, experience and skills that employers are eager to tap into.

The 55 years of age and over segment of the population posted the largest increase in employment of all demographic groups. Employment among older women surged 6.2 per cent last year, by far the largest increase of all demographic groups. Older men fared well too, with their employment levels jumping 4.5 per cent.

The unemployment rate among Canada’s youth (15 to 24 years of age) stood at 14.1 per cent at the end of 2012, similar to that of 12 months earlier, and almost double the overall jobless rate. It also remained above pre-recession levels. Canada’s situation is certainly not unique: Youth unemployment is high throughout the developed world.

The national unemployment rate among recent immigrants (those who landed in Canada within the last five years) in the core working-age group (25 to 54 years of age) was more than double that of the Canadian-born population in this age bracket in 2012. The most severe impediments to labour market integration are lack of Canadian work experience, lack of recognition of foreign credentials and language barriers. In this regard, government initiatives to support improvements in the recognition of foreign credentials are a welcome step.

Employment Changes by Industry Sector

The large majority of jobs created in 2012 (225,400 positions, or 72.3 per cent of the total) were in the services-producing sector. Gains were led by educational services (103,500), finance, insurance and real estate (67,200) and health care and social assistance (61,700). In contrast, employment in the professional, scientific and technical services shrank by nearly 70,000 last year. Two other areas of softness were public administration and accommodation and food.

The services sector accounted for 78.0 per cent of employment in December 2012. As in other advanced countries, there has been a shift in employment toward services during the past three decades.

The goods-producing sector created 86,500 new positions in 2012, with the manufacturing sector generating 62.0 per cent of the jobs. Manufacturing put in its best showing since 2002. The pace of construction hiring slowed in 2012, rising by 12,000 following the 35,800 increase recorded in 2011.

The goods-producing sector led in terms of percentage gains—employment in the sector rose 2.3 per cent year-over-year, outpacing the 1.7 per cent gain in services sector employment.

Employment Up In Most Provinces

Eight of Canada’s 10 provinces had a higher level of employment in December 2012 than a year ago. Nova Scotia and New Brunswick were the exceptions.

In percentage terms, employment increased the most in Newfoundland and Labrador (up 3.7 per cent, year-over-year), but the province still had the highest unemployment rate in the country at 11.5 percent. Quebec and Saskatchewan also experienced robust employment gains — up 3.5 per cent and 3.1 per cent respectively, far outpacing the national average growth rate of 1.8 per cent.

In absolute numbers, Quebec saw the biggest increase in employment with 138,000 net new jobs created in the province in 2012.

Alberta and Saskatchewan clocked in the lowest unemployment rates in the country at the end of 2012, at 4.5 per cent and 4.6 per cent, respectively.

2013 Job Prospects

With the Canadian economy projected to grow just 1.8 per cent in 2013, businesses are expected to take a cautious approach to hiring. Public sector restraint will also dampen employment gains.

Overall, we expect employment to increase by an average of about 15,000 jobs per month in 2013. For the year as a whole, the unemployment rate is projected to average 7.1 per cent compared to 7.3 per cent in 2012.

By Tina Kremmidas

Tina Kremmidas is the Chief Economist of the Canadian Chamber of Commerce.

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