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Finlayson: Canada's job machine is robust (Vancouver Sun)

Canada’s jobs machine is chugging along nicely even as the nation’s economy appears to be losing a step. Statistics Canada’s latest labour force survey reports that 51,000 jobs were created in February, far more than economic forecasters were anticipating.

On a six-month moving average basis, employment gains have been averaging 30,000 per month. The unemployment rate remained steady at seven per cent in February, as the number of labour force entrants offset the new positions created.

Drilling down into the data, private sector employment rose by 30,000 last month; since September 2012, Canadian businesses have been expanding their payrolls by 20,000 a month. By industry, job gains were concentrated in service-producing sectors, with professional, scientific and technical services and accommodation and foodservices emerging as notable hot spots. Manufacturing employment sagged and continues to trail the economy-wide job growth rate.

While Canada’s labour market took a hit during the 2008-09 recession, it has put in a stellar showing since then. More than 430,000 jobs were lost during the economic downturn. All of these had been recouped by 2010, with another 500,000 positions added since the economic recovery began in mid-2009. This contrasts with the picture in the United States and much of Europe, where absolute employment is still below the levels seen in 2008.

Despite February’s impressive jobs report, employment growth is likely to be sluggish in 2013. Taken together, a soft global economy, muted domestic spending by Canadian households burdened with record debts, and a decline in housing starts and real estate sales will hold the increase in real GDP to less than two per cent this year. In such an environment, it’s hard to envisage robust employment growth.

Still, Canadians can be grateful that a combination of highly accommodative monetary policy, sensible fiscal policy, and a resilient economy has given the country one of the best-performing labour markets in the developed world.

But that doesn’t mean all is well on the jobs front. Young adults looking for work are facing particular difficulties.

Youth unemployment rates have risen sharply in many countries since 2008 — and have reached truly frightening levels in parts of Europe. Canada has also seen youth unemployment rise, albeit at 13.6 per cent, the rate is much lower than in the distressed parts of Europe. Nonetheless, young job seekers here are not having an easy time of it.

Regardless of the state of the economy, young people commonly encounter barriers to accessing and advancing in the labour market. Lacking prior relevant work experience, they are often at a disadvantage when competing for vacant positions. Plus, they have a greater chance of losing their job when the economy turns down (“last in, first out”). And if they do become unemployed early in their careers, young adults may be at increased risk of experiencing subsequent spells of unemployment, and/or of becoming stuck in low wage jobs – a phenomenon known as “scarring” in the academic literature.

In a soft economy, the labour market challenges confronting young people are magnified. Employers looking for new staff become choosier and may be even less inclined to hire candidates with little or no experience. Then, too, in the aftermath of a recession some older workers will postpone retirement, thus reducing job openings and slowing labour force turnover.

In Canada today, these problems are being compounded by an apparent skills/education mismatch that is making it harder for some young adults to find suitable (or any) employment. According to a recent study by CIBC economists, 30 per cent of Canadian businesses claim to be facing labour shortfalls, despite large numbers of underemployed young people. The CIBC analysts identified 25 occupations that showed signs of “labour shortage.” These include many skilled trades and technical occupations, some science and engineering fields, and a host of occupations in the health care sector. Shortages are also evident in accounting, auditing, and mining-related occupations.

The evidence suggests that too few people in Canada are being educated to work in occupations for which labour market demand is relatively strong. At the same time, record numbers of young adults are obtaining undergraduate college/university credentials that don’t necessarily provide well-defined pathways to rewarding careers. To the extent that skill mismatches exist, they help to explain why it’s taking longer for many young adults to successfully transition from school to the job market.

Economic research indicates that pro-growth macro-economic and framework policies and targeted government programs can help stimulate the hiring of young entry-level workers. Educational upgrading (with a focus on in-demand fields), market-driven training programs, and enhanced labour mobility may lessen the “scarring” effects of joblessness — and should be part of the policy tool-kit used to address the risks posed by long-term unemployment among young adults.

Jock Finlayson is executive vice-president of the Business Council of British Columbia

As posted on the Vancouver Sun on March 13th, 2013.  Originally  posted on Troy Media on March 12th, 2013.