Business

LESS WORK AHEAD

ROSS LAVER April 26 1999
Business

LESS WORK AHEAD

ROSS LAVER April 26 1999

LESS WORK AHEAD

Business

ROSS LAVER

When the experts on Bay Street want to measure the strength of the country’s economy, they study all sorts of arcane indicators, from the number of housing starts to the pace of industrial production. Colleen Clarke prefers an easier method: the Toronto-based career consultant simply counts the number of people who attend her weekly job-hunting seminars. During the recession and downsizing wave of the early 1990s, Clarke’s presentations drew an average of 85 men and women, many of whom were feeling devastated after being laid off for the first time in their lives. These days, the weekly turnout is more like 40 or 45, and the mood is noticeably more buoyant “The difference is unbelievable, really,” says Clarke, 46, founder and executive director of the Executive Advancement Resource Network (EARN), a nonprofit group for unemployed business managers and executives. “It’s a bit like a golf score—we know we’re doing well when fewer people contact us.”

It’s not just Clarke’s organization that is doing well. Since the beginning of the year the national unemployment rate has been holding steady at 7.8 per cent, down from an average of 11.3 per cent in 1992 and lower than at any time since the dying days of the 1980s economic boom. In Clarke’s home province of Ontario, the country’s industrial heartland, the jobless rate is 6.4 per cent, thanks to a booming manufacturing sector, strong exports to the United States and higher spending by Canadian consumers. As a result, the outlook for laid-off workers has improved dramatically since the beginning of the decade, when factories across the country were closing and many experts were warning of the potential for double-digit jobless rates for the rest of the decade. But the latest unemployment numbers also beg an obvious question: will the labour market continue to improve, or is this—as recent history appears to suggest—about as good as it gets?

Based on the outlook for the economy as a whole, most experts think the employment picture is unlikely to get much better in the coming months. In 1998, Canada’s gross domestic product—the total value of all goods and services produced by the country in a given year—grew by three per cent, enough to generate 453,000 new jobs. This year, however, the consensus among private-sector forecasters is that GDP growth will decline to about 2.8 per cent—slightly higher than the rate at which the economy must expand to keep pace with Canada’s increasing labour force. “It’s only when GDP grows faster than 2.5 per cent that unemployment tends to fall,” says Derek Burleton, an economist at TD Bank Financial Group in Toronto. “Because of that, we really aren’t expecting a significant drop in unemployment this year. The pace of job growth we’ve seen recently is simply not sustainable.”

The unemployment rate is holding steady at 7.8 per cent, but that may be as good as it gets

Already, the rate at which new jobs are being generated has slowed considerably. In the five-month period from September, 1998, to the end of January, an estimated 325,000 new jobs were created across Canada, far above the average full-year increase of 243,000 new jobs since the end of the last recession. However, the increase in February was a much more modest 13,200 new jobs, and in March employment actually fell for the first time in nine months, by 29,200 positions. Economists blamed part of the decline on poor weather, which hurt the construction industry and retailers. The number of manufacturing jobs, on the other hand, increased by 34,800, further proof of the strong demand from the United States for Canadian exports.

The biggest challenge facing Canada’s economy this year, many analysts say, is the looming prospect of a slowdown in activity south of the border. Fortunately, there is little sign of that happening just yet. U.S. factory output, consumer spending and the housing sector were all vibrant in the first quarter of 1999, while the lack of any significant inflationary pressure has temporarily quelled fears of an impending hike in short-term interest rates. But the strength in U.S. domestic demand masks an underlying problem for the American economy: a widening trade deficit caused in part by a decline in exports to Latin America, Europe and Asia.

Falling foreign demand is one of the main reasons why experts believe U.S. economic growth will decelerate from an annualized pace of 6.1 per cent in the final quarter of 1998—the strongest in 15 years—to an estimated 3.6 per cent in 1999. That, in turn, is bad news for Canada, since exports to the United States account for roughly a third of this country’s GDP “If, as we expect, U.S. growth begins to slow, that will definitely affect Canada,” Burleton says.

In addition, there are several madein-Canada reasons why the unemployment rate seems unlikely to continue falling in the months ahead. Across the country, household debt is now at record levels and most consumers are in no shape to embark on a U.S.-style

spending spree, particularly since this year’s federal budget contained no sizable tax cuts. And despite the recent drop in mortgage rates to near 30-year lows, demand for new housing remains weak in Atlantic Canada, Quebec and British Columbia, and has been slowing in Alberta. (The only significant pocket of strength is Ontario, where the number of housing starts in March was at its second-highest level in seven years.)

On top of those problems, economists point out a disturbing trend in Canada’s employment statistics that will almost certainly offset some of the job creation that does take place this year. At the end of the 1980s boom, the labour participation rate—the share of the population aged 15 and older that is working or looking for work—was 67.5 per cent. Since then, it has been dropping more or less steadily, reaching 65.1 per cent in 1998. The decline among people between the ages of 15 and 24 has been even more pronounced, from 70.6 per cent in 1989 to 61.9 per cent last year. The message seems to be that young people, fearful of not being able to find jobs, are staying in school longer, while many older people have simply become discouraged and have given up looking for work. When, inevitably, those people do begin hunting for jobs again, their decision to enter the labour force will put upward pressure on the unemployment rate. “One thing we’ve consistently underestimated since the end of the recession is the extent to which people wouldn’t return to the labour force, and that’s certainly not something to celebrate,” says Rick Egelton, a former federal Finance official who is now deputy chief economist at the Bank of Montreal. He adds that if the participation rate had by now recovered to 1980s levels, “the unemployment rate would be a lot higher than it is.”

Yet for all the challenges Canada faces this year, the job market is unquestionably better than it has been at any time this decade. The improvement could not have come at a better time for Surrey, B.C., resident John Jamieson, a 39-year-old father of three who lost his job as a drywall shipper last November when the company that had employed him for 18 years decided to close one of its distribution centres. In February, following the advice of his Employment Insurance counsellor, Jamieson enrolled in a federally sponsored job-finding course that teaches people how to write résumés, organize references and prepare for job interviews.

The training paid off: by the end of the three-week program, nine of the 12 participants, including Jamieson, had found work, even though British Columbia’s economy remains among the weakest in the country. “I saw a job advertised in the paper and figured it wouldn’t hurt to get some practice by going for an interview,” Jamieson says. “I wasn’t really expecting anything, but after we talked for 15 minutes he offered me a position.” The new job, he adds, is “perfect”—similar to the work he was doing before, but higher up the management ladder. ‘To be honest, I really didn’t think I would have that hard a time finding a job,” Jamieson says. “The work is out there— it’s just a matter of making sure you’re organized so that you get it.” And judging by the latest economic forecasts, there may be no time like the present. □