The Canadian Job Market Growth Is All In The Low Productivity Sectors
The Canadian Job Market Growth is all in the Low-Productivity Sectors
To a national statistician, all jobs are the same when it comes to recording employment growth over time. Yet employment markets are very dynamic and this has a have a profound effect on productivity and national output. Recent Canadian experience demonstrates how this shift is taking place between the goods-producing and service-producing sectors. Total employment for 2019 grew at 1.7%, however, the goods-producing sector employment shrunk by 1.2%, largely due to a huge job loss in the natural resources sectors of over 8% (Figure 1).
- The oil and gas industry continue in a serious slump as investment dries up in many areas of the Alberta oil patch
- Forestry has been especially hard hit by what seems to be a secular decline, as export markets become more difficult to penetrate and
- Mining, in general, is barely holding its own as the prices of commodities worldwide weaken in response to the slump in international trade.
These sectors have for decades been the backbone of the Canadian economy, but now are declining in importance, especially as governments adopt policies to contend with climate change and trade wars.
Figure 1 Changes in Employment by Major Sectors
Source: Statistics Canada
The labor market is benefitting from a surge in service employment, which expanded by 2.5% last year, faster than the growth of the economy as a whole. The highest growth in jobs occurred in the public sector, including government, education, and health, which expanded greatly by 2.9% compared to just 1.8% for the private sector.Wages in the natural resource and manufacturing sectors averaged $24-28 per hour. Whereas, the average wages for the service sector were recorded at $18-20 per hour. Some groups of services are much higher paying, such as managerial and professional services which require higher education and specialized skills, inhibiting low-wage workers from moving readily into the high-wage sector.
Figure 2 Growth in Employment, Public vs Private Sectors
Source: Statistics Canada
These shifts in employment raise a whole series of issues regarding productivity and long -term growth in Canada. On balance, the goods-producing services have been high -wage sectors contributing disproportionally to total national output and income. The measurement of productivity in the service sector has always challenged economists and statisticians. Suffice to say, the convention chosen is to measure service output by using wages and salaries as a measure of a worker’s output. To that extent, the shift in the direction of more service workers (and fewer workers in the goods-producing sectors) reduces the growth in national productivity and national incomes.