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The first half of the year has been a challenge here in Canada, driven largely by the struggling oil sector, which tends to ripple through the economy. The general feeling is that Statistics Canada will announce a recession, given that Canada will have experienced two consecutive quarters of contraction.
Following a tough first quarter of low oil prices, mid-$40 range, and layoffs in the retail sector (Target, Sony, Mexxx) the second quarter has continued to see the effects of a depressed energy sector.
The employment rate at the end of Q2 is unchanged from the end of Q1, sitting at 6.8%. There has been a loss of about 11,000 jobs in the oil sector however Canada has actually added 33,000 jobs in Q2, and 176,000 jobs over the last 12 months.
As another economic indicator the TSX has been fairly steady, despite other volatility in the markets. At the end of Q2 the TSX was at about 14,500 which was down about 500 points from the 15,000 reading at the end of Q1.
As already mentioned the price of a barrel of oil has plummeted and is currently sitting around $55 a barrel, but at the end of Q1 was below $50. This had a significant impact in the oil patch, resulting in cut backs, reduction in spending and layoffs. When coupled with a low Canadian dollar however it is not ALL bad news, and Canadian manufacturers and exporters are benefiting.
The financial sector is one of the largest employers in Canada and continues to be a busy user of talent. This sector is centered primarily in Toronto, but with a significant presence in Montreal. There are many reasons why this sector remains busy including its highly competitive nature, evolving technologies, regulatory change and volatile markets.
The telecommunications sector is another big employer in Canada in a very competitive world. Differentiation is achieved through infrastructure, technology advancements and new offerings. In addition they are dealing with the effects of an aging workforce and the retiring baby boomers.
The construction industry is a large consumer of labor and remains a great place to find work, both in the trades and in the head offices of the large companies. You can see cranes dotting the landscape in most major cities with infrastructure projects, office towers and condo developments. The drop in oil prices has cost jobs in the oil sands and other large projects but in general, if people are willing to travel there is work to be had. There continues to be high demand for "trades" in the home renovation and small scale construction world.
Despite the need for governments to contain costs we have seen a fairly steady demand in Federal, Provincial and Municipal Governments. They are huge employers, and people with the right skills are always in demand. The required downsizing is generally achieved through attrition and there is always work to be done. Regulatory change, policy development and general administrative needs dictate the need for a large and skilled workforce that receives competitive incomes and very attractive pensions and benefits. As we get closer to Federal and Provincial elections the projects are slowing down and funding is harder to get. I would expect to see a slowdown in this sector over the next six months At least. It is difficult to say what will happen in Alberta with an NDP government that has no experience governing. The general consensus seems to suggest a steep but fairly long learning curve that will cost jobs.
The Canadian Staffing Index is an indicator of the strength of the largest provider of talent in any economy (the staffing industry) and an excellent barometer of the health of Canada's economy. The index suggests that the slowdown in the demand for talent we saw in Q1, continued into Q2. Increased demand for staff augmentation resources is often the first sign of recovery, and we are not yet seeing that.
Here at Eagle we have seen significant impact on our Western Canada business however other markets remain fairly steady. Following a first quarter drop of 30% in orders, we saw a further dip of almost 10% in Q2. The impact has been almost exclusively in Alberta and Saskatchewan. While other markets have been fairly stable there has been no offsetting increase in demand.
With more than 6 million people, and the largest number of head offices in Canada, the GTA (Greater Toronto Area) is by far Canada's, and Eagle's, largest market. This market accounts for approximately 60% of Eagle's business which comes from the major industries here, which include the financial, insurance, government and telecommunications sectors. The retail sector and the construction industry also generate significant demand, in addition to the engineering space. Despite a technical recession the GTA continues to demand talent.
In Western Canada Alberta, and more specifically Calgary has taken the brunt of the hit from the drop in oil prices, and it has been a significant hit. In addition to the hit in oil prices has been the uncertainty of an NDP government coming to power, who have already raised corporate taxes and have an environmental agenda that will impact big oil. Companies are still evaluating whether their investment dollars should be redirected outside of Alberta! It remains to be seen whether confidence can be restored to the business sector, and what affect that will have on jobs and the Canadian economy.
Eagle's Eastern Canada region covers Ottawa, Montreal & the "Maritimes". Ottawa is essentially a "government market" and as such will rise and fall based on Federal projects and spending. As an election nears we are seeing the typical slowdown in demand which will continue until well after the election. Montreal is relatively steady but not booming, with demand coming from the financial sector, the telcos and the construction industry. There will be some impact from the oil price felt particularly in Newfoundland. This region is typically slower for job creation at the best of times, so I expect it to be even slower than normal until we see an uptick in oil prices
At Eagle our focus in on professional staffing and the people in demand from our clients have been fairly consistent for some time. That would include Program Managers, Project Managers and Business Analysts who always seem to be in demand. It might just be our focus, but Change Management and Organizational Excellence resources are in relatively high demand too. Big data, analytics, CRM and mobile expertise are specializations that we are seeing more and more. On the Finance and Accounting, side we see a consistent need for financial analysts, accountants with designations and public accounting experience plus controllers as a fairly consistent talent request. Technology experts with functional expertise in Health Care is another skill set that sees plenty of demand
The first half of 2015 has seen a wide difference in the economies of the East versus the West. The West has suffered through the predictable fallout from a dropping price of a barrel of oil, the East has continued somewhat unabated. The general consensus appears to be that oil prices will not recover to their recent highs, and will not increase significantly in the near term. This outlook has companies taking a conservative approach to investment and growth plans. The impact in Calgary has been most significant, and now we are seeing impact on other markets, including Edmonton and Saskatchewan, which was expected.
The other big verticals such as Financial, Insurance, Telecommunications and Construction have not been greatly affected by the price of oil. Demand for talent appears to be strong and we are seeing these sectors benefit from newly available talent, previously employed in the oil sector.
The recent lowering of the overnight interest rate was a sign that the Feds want to get the economy moving again. With a Fall election coming they will hope things will improve, although the signs are that we are unlikely to see a much improved economy in the near term.
Despite the current crunch, we expect continued skills shortages in our knowledge economy, partly fueled by the boomers retiring, but also caused by our education system not turning out the right skill sets and the advancements in technology creating a shortage as the skills catch up.
The unemployment rate at 6.8% is not great but it is also not terrible. Professionals are probably seeing an unemployment rate more like 4%, so companies are still having trouble finding the right talent, at the right time for the right price!
That was my quarterly look at the Canadian job market and some of its influences.
Kevin Dee is CEO of Eagle (a Professional Staffing Company)
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