The Lies My Mommy Told Me, Part III

We review employment in Ontario periodically. When we saw the Toronto Star article Ontario leads Canada with 19,800 new jobs in January, we decided to see if the headline was true considering that several macro events have occurred: Canada is in recession, the oil market has collapsed and so has the Loonie. We might expect the first two events to decrease employment while the third event should reflect an increase in manufacturing jobs for the export market in particular. Let's take a look.

In this report we present our analysis of the Ontario labour market component of the total Canadian market using two sources of data from Statistics Canada: CANSIM Table 282-0087, Labour force survey estimates (LFS), by sex and age group, seasonally adjusted and unadjusted monthly, and CANSIM Table 282-0088, Labour force survey estimates (LFS), employment by North American Industry Classification System (NAICS), seasonally adjusted and unadjusted. Data selection methodology is in the Appendix. The data we use is not seasonally adjusted* (also read our view of seasonal adjustment in The Lies My Mommy Told Me, Part II). All terms are explained in the CANSIM table footnotes and are not reproduced here.

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The High Level View

Table 282-0087 shows aggregate labour market statistics for Ontario. We have summarized the current numbers as well as the month-over-month (mom) and year-over-year (yoy) changes in the data. Table 1. Current values and changes in labour market components, mom and yoy in thousands of jobs unless shown as a percent.

Labour Market Component	current	mom	yoy
Total Employment	6,868.0	-79.4	100.3
Employment full-time	5,543.3	-75.5	182.2
Employment part-time	1,324.7	-3.9	-81.9
Unemployment rate	7.3%	0.7%	0.3%
Participation rate	64.5%	-0.4%	0.1%
Employment rate	59.8%	-0.7%	+0.3%

Source: CANSIM Table 282-0087

Commentary

The jobs number reported by the Toronto Star and the Ontario Government is the seasonally adjusted total, a statistical fiction. January employment data shows an actual or unadjusted loss of 79,400 jobs in Ontario. The truly alarming aspect is that 95% of these jobs were high value full-time jobs. As a result the unemployment rate popped 0.7% in January to 6.8%.

Where the Jobs Are in the Economy

Table 282-0088 gives changes in employment by category as defined by the North American Industry Classification System. The high level breakdown is by Goods-producing sector and Services-producing sector. We present data in Table 2 below that is selected on the basis of relevance to our narrative or showing anomalous change. Table 2. Changes in employment in industry sectors and sub-sectors, month-over-month (mom) and year-over-year (yoy) in thousands.

Sector and Sub-sector	mom	yoy
Total Employment	-79.4	100.3
Goods-producing sector	-40.0	37.6
Agriculture	-4.8	-0.2
Natural resources	-1.1	8.0
Construction	-22.8	15.8
Manufacturing	-11.6	18.0
Services-producing sector	-39.8	62.6
Professional, scientific and technical	3.9	24.1
1. Educational services	6.3	0.0
2. Health care and social assistance	-3.7	19.3
Accommodation and food services	0.4	12.9
3. Public administration	-9.4	-7.2

Source: CANSIM Table 282-0088

Commentary

The good news is that almost all categories of employment showed growth over the last year, usually indicative of a growing economy. The shift from part-time to full-time jobs and the growth in goods-producing industries plus certain service industries like professional services, include the more highly paid jobs. The decrease in public administration jobs(government) stood out but is positive for the economy also. As we documented in Blowin’ In The Wind, goods-producing jobs tend to be more highly paid than service-producing jobs by 30% on the average. The skew in Ontario of goods-producing jobs to service-producing jobs is 1:4.0. The January job loss for each of the two sectors was about equal at 1:1. By eliminating jobs in the two categories at this ratio, the overall skew is increased towards lower paying service employment. Finally, if we note that job growth in the three public sectors over the last year is 25,000 out of a total job growth of 100,300, we find that the public sector was responsible for 25% of the job growth in the province.

Summary

The key points of the January jobs data are:

• Ontario lost 79,400 jobs, 95% of which were full-time jobs with 5% part-time jobs;
• the goods-producing sector had a net loss of 40,000 jobs with manufacturing loosing 11,600 jobs;
• the services sector lost 39,800 jobs, a ratio of 1:1 with the goods-producing sector;
• despite a gain of 6,300 jobs in education, the public sector shrank by 6,800 jobs; and
• the annual increase in the combined public sector jobs was 25% of the total jobs created in Ontario over the last year.

The decline in employment, although partly seasonal as with construction jobs, is likely reflecting our first two points: an economy in recession and the collapse in commodity prices and associated exports. The fact that manufacturing also declined by 11,600 jobs likely reflects contracting economies in our trading partners, something that the lower dollar may soften but not avoid. Lastly, the transformation of our economy from goods-producing (resources) to service-producing (resourcefulness: cf. Trudeau), at a ratio of 1:1.66 in job growth, continues the deterioration of the income base and hence, future economic growth through consumption. And as we have observed before, there is a compounded negative aspect of this jobs picture because public sector jobs carry with them high cost future pension and medical benefit obligations while carrying a lower productivity than private sector jobs.