Ontario’s Manufacturing Crisis

Global factors – exchange rates, international trade, and now the credit crisis – have undermined Canadian manufacturing. Since Ontario is Canada’s manufacturing heartland, it suffered a great deal of collateral damage.

The conventional view is that the province is caught up in a pan-Canadian crisis rather than in something particular to Ontario.  Initially, Quebec suffered proportionally greater losses than Ontario.

The most recent Labour Force Survey suggests a changing pattern of manufacturing job losses (and gains):

 

Nov. 2002 –

Nov. 2005

Nov. 2005 –

Nov. 2007

Nov. 2007 –

Nov. 2008

Total

Ontario

 

 71,700

 6.4%

 101,300

 9.1%

 77,800

 7.0%

 250,800

 22.5%

Quebec

 

 71,600

 10.7%

 73,200

 10.9%

 (24,700)

 (3.7%)

 120,100

 17.9%

Manitoba

 

 2,500

 3.6%

 (6,000)

 (8.8%)

 4,000

 5.8%

 500

 0.7%

Rest of

Canada

 10,700

 2.3%

 (3,900)

 (0.8%)

 10,300

 2.2%

 17,100

 3.6%

All of

Canada

 156,500

 6.7%

 164,600

 7.1%

 67,400

 2.9%

 388,500

 16.7%

Note: Percentages are of total manufacturing employment in November 2002.

Canadian manufacturing employment peaked in November 2002. In the three years since then, Ontario and Quebec lost the same number of manufacturing jobs. Since Ontario’s manufacturing sector was twice as large, Ontario lost proportionally half as much manufacturing employment.

In the next two years, Ontario and Quebec lost about the same proportion of manufacturing jobs. In the past year, Quebec regained some manufacturing employment while Ontario shed more at an accelerated pace.

In total, since 2002, Ontario has lost between one-in-five and one-in-four of its manufacturing jobs. By comparison, Quebec lost one-in-six manufacturing jobs and Manitoba did not really lose any.

Beyond the fact that monthly figures bounce around a bit, there are at least two possible explanations of these apparent trends. The manufacturing sector in Quebec and some other provinces is dominated by forestry (sawmills, pulp mills, etc.), which has been in crisis for years. Ontario’s manufacturing sector is dominated by the automobile industry, which is only now experiencing its severest crisis.

Another possibility is that Quebec and Manitoba have enacted proactive policies that Ontario has not. For example, both Quebec and Manitoba established refundable tax credits for investment in manufacturing while maintaining public power systems that provide low-cost electricity.

Whatever the explanation, the particular severity of manufacturing job losses in Ontario calls for a provincial policy response in Budget 2009.

7 comments

  • There’s a study in today’s StatCan Daily that discusses the effects of the terms of trade shock on Ontario and Quebec. An extract:

    How did the manufacturing industries in Ontario and Quebec react?

    In Ontario, real manufacturing GDP declined in nearly every manufacturing industry. The confluence of rising input costs, falling competitiveness as the dollar rose and competition from emerging nations, particularly China, led to a general retrenchment of manufacturing activity. Overall, real manufacturing GDP declined by an average of 1.1% per year.

    In Quebec, real manufacturing GDP tended to decline in industries that produce consumer goods – clothing and textiles, paper, printing and furniture – and tended to increase in industries that produce capital goods. The manufacturing saw some industries decline while others grew, but there was little overall decline in manufacturing GDP.

    How did employment change in Ontario and Quebec?
    Employment adjusted across industries. Manufacturing employment in Ontario had an average annual decline of 3% between 2003 and 2007.

    In Quebec, manufacturing and forestry, fishing, mining, oil and gas extraction saw average annual declines of 3% and 2% respectively. However, in both provinces, employment gains in other areas, particularly construction and services, more than made up for the job losses, contributing to annual average job growth of 2% in both provinces. Job creation in Ontario and Quebec was sufficiently strong that unemployment rates declined despite the strongest foreign competition in many years, a rapid appreciation of the exchange rate, and record setting commodity prices. Ontario’s unemployment rate dropped from 6.9% to 6.5%; Quebec’s unemployment rate declined from 8.4% to 7.0%.

  • and again we get back to that arguement, what kind of jobs were created.

    If I could ever get my employment quality index off the ground we would probably have some idea. As it stands we have no real good measure for the types of jobs created. If you have a measure paste it up here and I show you its short comings on why that measure cannot be used to judge employment quality, there is no meaures. About the only proxity one can reasonable envision a strong correlation is wage distribution. We have witnessed a plethora of studies showing an increasingly polarized labour market. this would lend support to the notion that we are witnessing growing precarious employment versus high quality work declines. Construction employment may have served as a temporary buffer but that industry has started its decline.

    Paul

  • Construction employment may have served as a temporary buffer but that industry has started its decline.

    Collapse is more like it.

  • no not according to the data from LFS, construction employment is still quite high compared to historic levels. We have not suffered the US meltdown in that industry- yet. At least according to the data, we are riding a mild but persistent decline over the past 2 quarters or so.

  • We have witnessed a plethora of studies showing an increasingly polarized labour market.

    Actually, StatsCan’s estimates for gini coefficients are either stable or slightly declining since 2001. The real increase happened during the 80’s and early 90’s.

  • Regarding polarization, I think the crisis is in unionized jobs, which are being replaced by mid-level professional jobs filled by people with degrees. That would explain why everyone thinks the working class is screwed even though the gini coefficient is stable. People with only a high school education have a good shot at a $16/hr job, but to get more than that, you will increasingly need to get a degree and lots of experience. You will get fewer bonus points for being white, male, a baby boomer, or living in central Canada.

  • It is interesting that the gini started to go sideways in Canada as soon as the real wage stopped stagnating. Imagine that. The story of the gini in Canada is one of a post-war decline which troughs in 1991 and then rapidly reverses course over the 1990s and then starts going horizontal during the 2000s.

    I did a post on this with a plot of the GINI a year and half back:

    http://rppe.wordpress.com/?s=screw+u+kuznets

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