Canada – Looking Forward
Employment and Savings – Paving the way for growth Canada’s unemployment rate hit a 33-year low in 2007 and with low unemployment comes upward pressure on wages translating into increased disposable income for Canadians (Table 3). It is interesting then to look at the overall employment picture and what Canadians are doing with their income. While Canada continues to experience job losses in manufacturing, this isn’t a new trend. The appreciation of the Canadian dollar and the offshoring of manufacturing activity to cheaper production centres have had an impact on Canada and the US for a number of years now. The recent slowing of the US and global economies has only helped to exacerbate the situation further. As previously noted in Table 1, the demand for end products from Canada has been on a gradual decline since 2000, directly affecting the job market in the manufacturing sector, particularly related to the struggling North American automotive sector. However, despite the manufacturing job losses, unemployment in Canada is persistently trending downward as job losses in agriculture and manufacturing have been offset by job creation in other sectors such as utilities, construction, transportation, and professional, scientific, and technical services, many of which are higher paying opportunities. This trade off between manufacturing jobs and other service sector related jobs is also evident by looking at the vacancy rates in the office and industrial space markets throughout Canada. While industrial vacancy rates in central Canada’s manufacturing heartland are softening, office vacancy throughout Canada has been trending downwards. Much of the job growth we have experienced over the past few years has been in office space related jobs, thereby driving the demand for office real estate across the country, which should bode well for the continued health of the nation’s office market. Since 2007 the US has been plagued by consistently weakening labour markets, most recently eight consecutive months of job losses and rising unemployment. Canada has only recently begun to experience this trend reversal in unemployment (Table 4). For the remainder of 2008 we can expect unemployment to fluctuate, partially due to global economic conditions but also due to the cyclical nature of Canada’s unemployment rate. Canada is positioned to continue generating jobs in the long run as the resource market remains strong and a slight recovery in the manufacturing sector follows a forecast weaker Canadian dollar. As the resilience of the Canadian economy becomes more apparent, also expect more foreign investment stimulating job growth in Canada.
Since 2002 the percentage of Canadians working has been growing rapidly, reaching record high levels of employment even through the beginning of the credit crunch (Table 5). Thus, although Canada’s employment statistics have weakened in recent months, Canada continues to experience record levels of unemployment and employment. Exposure for the Canadian economy will come further down the road as the population continues to age and low birth rates persist resulting in a shrinking of the overall labour force unless propped up by net immigration. Canada’s other exposure relates to its labour productivity levels which continue to lag those of the US.
Table 3. Earnings on the Rise Full Time and Part Time Median Weekly Wages $800
$225
$750
$200
$700
$175
$650
$150
$600
$125 00
01
02
03
Full Time Median
05
06
07
08
Part Time Median
Source: Conference Board
Table 4. Unemployment Rate Near Record Low Canada vs US Unemployment Rate 8%
7%
6%
5%
4%
3%
00
01
02
03
Source: Statistics Canada / US Census Board
Will We Remain a Safe Harbour in the Storm?
04
04
04
Canada
05
US
06
07
08