CANADIAN JOB MARKET Review Third Quarter 2015
This has been a tough year thus far in Canada. With GDP contracting for each of the first two quarters, Canada suffered a “technical recession”, and many businesses felt it! The primary reason for the malaise has been the impact on the oil sector caused by a low price per barrel. Another impact has been the economic meltdown in China, which is a large consumer of Canadian raw materials.
The employment rate at the end of Q3 dipped to 7.1%, from 6.8% in Q2. This was attributed to more people entering the workforce, but still means a lot of people looking for work. Canada added about 31,000 jobs in Q3 and has added 161,000 in the 12 months to September. This is down from the 176,000 jobs over the 12 months to June.
As another economic indicator the TSX has been fairly volatile. At the end of Q3 the TSX was at about 13,300 which was down about 1,200 points from the 14,500 reading at the end of Q2.
As already mentioned the price of a barrel of oil has plummeted and is currently sitting around $50 a barrel. The price has fluctuated significantly having reached lows near $40 a barrel during Q3 but was at $55 at the end of Q2. There is no relief in sight for the oil companies yet meaning continuing cut backs, reduction in spending and layoffs.
The Canadian dollar has also been suffering and at the end of Q2 a Canadian dollar was worth less than 75c US, compared to 80c at the end of Q2. This is not ALL bad news, and Canadian manufacturers and exporters are benefiting, however travel is costly as is importing materials.
The banking sector continues to be a big user of talent and one of the largest employers in Canada. The primary demand for talent is in Toronto, but there is also demand in Montreal. While the competitive nature of the industry requires investment in innovation, technology and responsiveness to regulatory change there is also a need to control costs. We have seen some fluctuation in demand as certain parts of the financial sector have been reducing staff while others have been hiring.
The telecommunications companies are big employers in Canada and are also very cost conscious. While they demand the best talent in order to compete, they are also careful about keeping employment costs under control. Some of the drivers of demand here include the highly competitive nature of the business, investment in infrastructure, technological innovation and a need to plan for a retiring “Boomer” workforce.
A recent US report cites labor shortages in the US construction industry and I have no doubt we will see the same here in Canada. It is an industry that is in demand, and other than the current “hiccups” in the oil sector, which will pass, there will be a constant demand into the future. From cranes dotting the landscapes of our cities, through infrastructure work on our highways and home improvement projects everywhere the signs of an in-demand industry are plain to see.
The upcoming Federal election has the usual effect of dampening demand for resources, as projects are put on hold to ensure they are still the mandate of the new administration. Governments everywhere are being very careful with their spending however there is always some demand, whether it is at the Federal, Provincial or Municipal level. They are huge employers, and people with the right skills are generally always in demand. 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. I would expect to see a slowdown in this sector that will depend upon whether there is a change in government, and might last from 3 to 6 months. The newish Alberta government has not yet ramped up its new projects, but it is expected that work will be generated as they change the focus of the administration. Having said all of the above, one area of demand is in the transportation space where governments are making investments across the country, thus creating job opportunities.
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 latest score suggests a continued slowdown in demand for talent in Q3. I would expect an increase in demand for staff augmentation resources in Q4 as we recover from the “technical recession”.
Here at Eagle we continue to see significant impact on our Western Canada business however other markets remain fairly steady. Year over year the number of orders received has dropped about 20%, which can largely be attributed to the oil patch. Other markets have been relatively consistent across the country.
The GTA (Greater Toronto Area) is by far Canada’s, and Eagle’s, largest market. The sheer size of the population and the fact that it contains the most head offices makes it a large consumer of talent and as such, the best place to be looking for work. 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 as the “oil capital” of Canada, has taken the brunt of the hit from the drop in oil prices. All of the major oil companies have their Canadian head office in Calgary and cost cutting has resulted in many layoffs. The “anti-oil” stance of the relatively new NDP government has done nothing to help matters. If investment in Alberta is not going to be valued then these companies can invest elsewhere. The “oil sector bust” will pass but it remains to be seen whether investment will remain in Alberta bringing back the jobs that have been lost to date. Elsewhere the impact has not been as bad, with Vancouver, Regina and Edmonton still in need of talent.
Eagle’s Eastern Canada region covers Ottawa, Montreal & the “Maritimes”. The impact of the upcoming Federal election will be felt in Ottawa for a few months, resulting in a slowdown in demand. Montreal is relatively steady but not booming, with demand coming from the financial sector, the telecommunication companies and the construction industry. The Maritime Provinces typically have higher unemployment rates ranging from 8.8% in Nova Scotia to 13.6% in Newfoundland, and this region remains a tough place to find work.
The Hot Client Demand.
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, web (portal and self-serve) and mobile expertise (especially developers)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. Expertise in the Capital markets, both technical and functional, tends to be a constant ask in the GTA. Technology experts with functional expertise in Health Care is another skill set that also sees plenty of demand
“If all the economists were laid end to end, they would not reach a conclusion.”
The third quarter of 2015 has been “more of the same”, with the economy severely affected by the oil sector and corporate concern about the political climate. An NDP government in Alberta and an upcoming election that has the potential to bring a left leaning Federal government is not going to result in good news to corporate Canada. There is no timeline on when oil will recover, nor what the recovery will look like, and until the election is done we will not know the impact on business.
While Alberta has suffered most, with recession-like symptoms, the rest of Canada has also endured a technical recession for the first two quarters with the result Canada’s unemployment rate is at 7.1% the worst it has been all year.
Despite all of that, there are still opportunities created because of the demographic pressures (retiring Boomers) and the need for companies to remain competitive. We see opportunity in the construction industry, the financial sector, the telecommunications sector and the Insurance sector. We see the markets with the greatest demand as being Toronto, Vancouver and perhaps Montreal. Other markets that should improve after the election might be Ottawa and Edmonton which should see some increase in government spending as new programs roll out.
While we don’t expect to see labor shortages in the near term (at least until the oil sector recovers) we do see skills shortages particularly in the knowledge economy and the trades.
The unemployment rate at 7.1% could be easily reduced with some positive news on the oil front and some positive moves by the governments (Federal and Provincial) in power. If that happens we could quickly move back to a full employment situation and start to run up against the different issue of finding enough people! Of course my crystal ball is about as good as anyone else’s, so we will wait and see how the economy unfolds over the balance of the year and into 2016.
“I always avoid prophesying beforehand because it is much better to prophesy after the event has already taken place. “
That was my quarterly look at the Canadian job market and some of its influences.