Bank of Canada says it is monitoring the struggles of the job market before announcing necessary steps to help with the recovery of the Canadian economy that’s been hit by falling oil prices. Read More
Source: HR Reporter
Canada’s job market is expected to see a flat growth rate, with oil companies shedding jobs as other sectors create new ones. The layoffs in the oil sector are going to significantly impact the unemployment rate in the province, say experts.
The Canadian economy has been nearing recession in Alberta due to collapsing prices of oil, pushing the employers into uncertainty about future job hires. As a result, self-employment and part-time jobs are on the rise, as people hold on to alternatives while waiting for full-time employment.
Economists at the Conference Board of Canada have said that job seekers might have to wait until 2016 for “solid employment opportunities”.
“This is only the beginning. As energy producers cut back on investment this year, there will be ripple effects throughout the entire economy, eventually hitting the construction sector and other services that depend heavily on the oil and gas sector for business,” said David Madani of Capital Economics.
The Conference Board also believes that hiring will be overtaken by layoffs in the coming months, and the unemployment rate may increase to 6.9% by mid-year.
However, Bank of Canada policymakers are optimistic that a depreciated dollar could provide some reprieve through increasing employment in Ontario and Central Canada, where the lower currency is expected to benefit exports. But this hasn’t convinced industry experts, who believe that Ontario will not be able to bounce back to industrial success by end of this year.
According to Rafael Gomez, economist at the University of Toronto, the job market can improve only if there is sufficient economic growth. “If you have a high-growth economy, we’re talking growth of not a meagre one percent or even two, but like four, then you might generate enough firms that are new and growing and would be hiring,” says Gomez. “That’s the only way we’re going to see a turnaround in employment numbers in that sector; is if growth basically tripled from its current rates. And it’s not going to.”
The Canadian economy is expected to grow at a rate of 1.9% this year, according to the Conference Board. “We’ve seen no pickup in investment yet. There hasn’t been any sign that it’s taking hold. Unless [Central Canada] starts attracting more investment, we’re not going to see a big pick up in the number of jobs,” says Matthew Stewart, Conference Board economist.
Another concern for the job market is the steadily declining rate of business profits, which is shown to have an adverse effect on employment levels. The commodity price index of the Bank of Canada has declined by an alarming 36% in the past few months, and this has caused a lot of worry among businesses whose profits have a strong correlation with the index.
Many energy and non-energy firms have been reporting a decline in profits, and even losses. Insurance firm Manulife has reported a 50% decline in earnings last week. “Unless oil prices rebound more substantially soon, that could reduce profits by as much as 30 per cent. On that basis, investment would decline sharply,” says Madani.
Madani believes that if investment declined by 10%, it will put the economy into recession. However, he is hopeful that certain positive factors might reduce this risk. “The improving US economy and lower Canadian dollar should aid exporters, supporting investment in certain sectors other than energy.”
While exports may be expected to benefit with the lower dollar, which may also improve Ontario’s declining share of investment, this will not help create more jobs. All it does is fund technological advancements, especially in the auto industry. “Every year we’ve been subsidizing the big auto manufacturers, they’ve been shedding jobs every year whether they’ve been making profits or not,” says Gomez.
The trouble in the job market is also going to affect Ottawa’s decision on whether or not to invest in public infrastructure, which has been neglected for several years. Finance Minister Joe Oliver had been urged to invest billions of dollars into public works in order to up the employment rate, but has been reluctant to do so for fear of losing federal surpluses beyond a point. “This is precisely the wrong time to launch a massive deficit program that would undermine investor confidence, erode our credit standing, weaken our ability to withstand further international shocks, add to our debt burden, reduce our ability to support social programs and burden our children with our expenditures,” the minister said.