Today’s Labour Force Survey: The High Dollar Hits Good Jobs

My take on Statistics Canada’s release follows:

The Dollar Hits Parity

During the reference period for this Labour Force Survey, September 15 through 22, the Canadian dollar reached parity with the American dollar. Today’s release does not capture the consequences that have begun to play out since then.

A rapidly-rising exchange rate has increased the price of Canadian-made products in foreign markets, which has reduced the viability of Canadian manufacturing. If the Bank of Canada chooses not to take corrective action, thousands more manufacturing jobs will disappear.

The Manufacturing Crisis Deepens

Canada lost 3,000 more manufacturing jobs in September. In total, 295,000 manufacturing jobs have disappeared since November 2002. Last month, Ontario lost 11,000 manufacturing jobs and Quebec lost 7,000.

Other Goods-Producing Industries Down

Employment declined by 8,000 in construction, 8,000 in utilities, and 3,000 in natural resources. The service sector, which generally pays lower wages, accounted for all of the net employment creation. This trend contradicts the argument of CIBC and Export Development Canada that lost manufacturing jobs are being replaced by relatively well-paid jobs in other goods-producing industries.

Wage Trend Positive

Despite job creation being concentrated in lower-wage industries, average Canadian wages have increased over the past year. After years of sluggish growth, hourly wages are now rising at about 4% per year. Although half of this increase is needed simply to cover inflation, the other half constitutes a genuine improvement. More and higher wage increases will be needed to recover from the long period during which wages stagnated as productivity improved.

5 comments

  • I just don’t get this. Strong employment growth, encouraging growth in real wages, but this is bad news because manufacturing employment is down?

    No-one is giving out points for style here.

    Despite job creation being concentrated in lower-wage industries, average Canadian wages have increased over the past year.

    It would be very interesting to see how the arithmetic of that sentence works out.

  • Dear Mr. Gordon
    you win the prize! as if you do not get it – it is precisely the problem that we find ourselves in, as most of the public doe not get it either. just because the average wage bill increases, does not mean that it is evenly distributed. this fact just further reinforces the bimodal distribution that is continuing to unfold within the labour market. polarization of wages is not an extremely complicated artifact to dig out of the data. Style points? is that what we discount inequity to these days, some high notion of a less than cursory analysis of the labour market. Have a look and you will see.

    pt.

  • Thanks for the feedback, Stephen. Your point that we should not fetishize manufacturing is well taken. However, as discussed elsewhere on this blog, manufacturing accounts for large shares of Canada’s high-productivity jobs, exports, and research and development.

    To elaborate on the sentence you have taken issue with, changes in the composition of employment are driving wages down. Other factors are driving wages up by a more-than-offsetting amount. While this is good news, it does not mean that we should not worry about employment composition.

    Regarding the arithmetic, note that Statistics Canada’s measure of fixed-weight average hourly earnings has been growing faster than average hourly earnings. In other words, average wages would be rising more if we could maintain (or increase) manufacturing employment.

  • We are a real world example of this issue. We are a small Canadian manufacturing exporter, sending goods to Europe, but billing in US funds. Our dollar strength has definately put major strains on our young company. I will take a different focus with my comments, however. The drawback to the situation is that many manufacturers will not weather the storm and there will be people out of good quality high paid work. It is hard to ever suggest something positive might result from such a terrible thing, but let’s upset some people and do it anyway. The reality is that the manufacturing companies that weather this storm will be:
    1. COST FOCUSED – their costs under strict controls
    2. THE MOST RESOURCEFUL – i.e. always improving in all areas and embracing technology, new product development and marketing;
    3. QUALITY ORIENTED – keeping your product on top;
    4. POSSESS QUALITY PEOPLE – these employees go above and beyond the call of duty to make a company succeed. Those that do the bare minimum for big pay are cancer for companies;
    For what it’s worth, the above points are what we continually strive for in this company, and I believe it is why we are still here.

  • A note today that marks a bit of a watershed in the growing concensus regarding employment growth and the decline of quality jobs.

    Imagine even the banks are now hitching up their horses to our wagon. I still am working on a new measure to help replace the “CIBC job quality index”.

    I think it is an oxymoron to mention quality anywhere in that survey vehicle’s name. Looks like the TD bank has a bit of bad taste in there mouth similar to me when reading that report. I would love to build a replacement for that vehicle, but upon assessing the parameters to build and deliver such a project it will take some time and resources, more than I can spare.

    Anyone wanting to give me a hand or has some extra project money hanging around and wants to help cover the resources to unleash a decent effort into taming and customizing the data for such an endeavor, let me know.

    have a read of the article here.

    http://www.reportonbusiness.com/servlet/story/RTGAM.20080415.wtdjobs0415/BNStory/Business/home

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