OTTAWA — The Canadian economy has been on a three-month streak of job creation and businesses appear set to continue that into the next three months, but some economists are raising concerns about the quality of jobs that are being created.
CIBC World Markets senior economist Benjamin Tal said while the headline numbers about job creation have been good, the quality of the jobs has not been great.
And Tal suggested that as governments look to cut spending to balance their budgets, the situation isn’t likely to improve.
“This deterioration will probably continue over the next few months because I see some softening in government jobs which always tend to be relatively high quality jobs and I see some softening in construction jobs,” Tal said.
“So those two forces that have been very strongly supporting the economic recovery and the job market recovery of the past two years, will not be there and what will replace them will probably be service-oriented jobs.”
The Canadian economy created 28,000 jobs in June and 238,000 over the last 12 months. The results blew past a disappointing month in the U.S. where its much larger economy added just 18,000 jobs in June.
And the Bank of Canada’s business outlook survey found businesses were optimistic about the prospects of hiring new workers with 57 per cent of the firms surveyed expected to hire new workers over the next year compared with just four per cent of firms expected to have fewer employees.
However, the unemployment rate in Canada stood at 7.4 per cent, a full percentage point higher than where it stood before the financial crisis in 2008.
And average hourly wages in June were up just under two per cent compared with a year ago, less than the rate of inflation.
Tal pointed to the relative weakness in the other economic indicators for the second quarter that came even as the economy continued to crank out more jobs.
“There is a link between employment and income and if quality is going down, then this link is not as clear. You can have more and more jobs, creating less and less income,” he said.
“Consumer spending, income growth, retail sales, they’re all linked to quantity and quality. Granted, a low quality job is better than no job, but the headline numbers exaggerate the real health of the Canadian labour market.”
Canadian Auto Workers union economist Jim Stanford said the growth in the absolute number of jobs in Canada, while better than the U.S., is not as impressive as it appears to be.
Stanford notes that during that month, the Canadian population continued to grow so the increase in the number of jobs in Canada, while significant, doesn’t tell the whole picture.
He pointed to the employment rate in Canada as a better indicator. It stood at 62 per cent in June, up 0.2 percentage points from 12 months ago.
“At most we’ve recouped one-fifth of the damage,” he said of the losses in the recession.
“So even on the quantity grounds we have a huge distance to travel before we can reasonably say that the recession is over.”
Stanford pointed to the gains in part-time and self employment as signs of weakness in the quality of the jobs created.
“There is some self employment that reflects the positive dream of being your own boss and having a good idea that you want to build a business around, but a very large proportion of self employment is people who lost their paid work and are now trying to make ends meet by doing consulting or selling Amway from their basement,” he said.
Tal said the change in the workforce and the available jobs has also been a structural one for the economy and education will be the key to success in finding work.
“It will be more difficult to find a job if you don’t have the qualifications,” he said.
“This is going to be a very brutal labour market with many opportunities, but if you don’t have the qualifications you have no chance.”