Job creation drags as economic headwinds grow

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Canada's once powerful job-creation machine is sinking into low gear.

In the past six years, Canada has added nearly 1.4 million jobs, the strongest performance among the G7 leading economies, Finance Minister Jim Flaherty noted in a speech this month.

In recent months, though, the jobs market has felt the drag from disappointing GDP growth and a private sector that is shrinking.

The jobless rate, at 7.4 per cent, hasn't budged from last year and is higher than before the recession. Hours worked are ebbing, and the average duration of joblessness remains above long-term averages. More than 1.4 million Canadians are unemployed and most economists don't expect a hiring spree in the months ahead.

In the past six months, Canada has created an average of just 12,000 jobs a month, all in the public sector, notes Krishen Rangasamy, senior economist at National Bank Financial. The private sector has shed jobs, he said.

Hours worked have fallen in line with a slowing economy, ebbing to their lowest level since May "so much so that fourth-quarter growth in hours worked is now tracking negative, clearly not a bullish sign for GDP growth in the final quarter."

Momentum in the broader economy is already decelerating. Canada's gross domestic product slowed to 0.6 per cent in the third quarter, the weakest pace in more than a year, Statistics Canada said last week. Economists expect the pace to improve a bit in the fourth quarter although a more tepid jobs market means domestic demand is likely to be weak in months ahead.

Hiring in the coming months "could face headwinds from slowing in consumer and housing activity, reflecting a softening pace of household debt accumulation," said Emanuella Enenajor, economist at CIBC World Markets, who predicts the jobless rate will improve only gradually, averaging 7.2 per cent in the coming year.

A report by CIBC last week showed the duration of joblessness is still high. The average length of unemployment is 16 weeks – five weeks longer than pre-recession levels, and two weeks above the average rate seen since the early 2000s. While the long-term jobless rate has come down in the past two years, it is still higher than its long-term average, especially among people over the age of 45.

The bank expects measures of long-term unemployment will climb even higher, in part because of a mismatch in the labour market between the skills employers want and the skills job-seekers actually have.

Recent corporate announcements highlight an economy in flux. Research In Motion Ltd. is in the midst of 5,000 layoffs, Montreal is shedding pharmaceutical workers and Resolute Forest Products Inc. is closing its pulp and paper plant in Fort Frances, Ont., affecting about 239 workers .

It's not all grim, though. Alberta and Saskatchewan remain hot jobs markets, and demand for engineers is growing across the country. Manpower's latest hiring outlook showed optimism in the mining sector and the West.

Details on labour market trends in October will come Friday. Economists expect about 8,000 new jobs were created although there are a large range of forecasts, ranging from a loss of 10,000 positions to a gain of 25,000 jobs.