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Labour + Industry

Is Canada's Economy Stalled?

Government brags of new jobs created, but gains are overstated, says economist.

Jeremy Nuttall 9 Feb

Jeremy J. Nuttall is The Tyee's Parliament Hill reporter in Ottawa. Find his previous stories here.

This coverage of Canadian national issues is made possible because of generous financial support from our Tyee Builders.

The Conservative government likes to boast that it has created 1.2 million jobs in the past seven years, an impressive figure on the face of it.

But take away some selective figuring by the government and those jobs represent about half of what Canada needs right now, an economist says.

Jim Stanford, an economist with Unifor, Canada's largest private sector union, said that while the Tories' job creation numbers are accurate, they're also skewed.

The main problem with the job creation boast, Stanford argued, is that the Conservatives open the argument using 2008 -- the year the financial crisis hit -- as the base year.

In that year, 400,000 jobs were lost, but Stanford said those jobs returned in the subsequent recovery -- not as a result of a job creation plan. Using that argument, the 400,000 job gains should be removed from the 1.2 million jobs figure the Conservatives cite, he said.

Overall, Stanford said Canada's economy is far weaker than the government lets on. Stanford and other economists interviewed say they believe the economy is overly reliant on housing for economic growth, and believe the economy will slow over the next five years.

Economy stagnating

Stanford said years of government austerity plus the hoarding of money by large corporations -- even in spite of low corporate taxes -- has made the economy stagnate.

"At any given point in time, the economy has four big drivers, consumers, businesses, foreigners through our exports and government," Stanford said. "Those are the four major engines of the economy and right now none of them are really in gear."

On the job creation argument, Stanford said Canada has only gained 780,000 jobs if gains are measured from 2009 and exclude the 400,000 jobs that figure into the Conservative equation.

"The more meaningful comparison would be to say 'where were we before the recession hit?'" he said. "In that regard we've fallen way, way behind population growth."

Right now, about 308,000 jobs per year have to be created to keep up with population demand, he said. That means the country actually needed 1.55 million jobs created from 2009-2014 to keep up.

As well, he said, one in five new paid jobs -- jobs that are not self employed -- created between the end of 2007 and the end of 2012 went to a temporary foreign worker. Stanford said the exact number of jobs that went to temporary workers couldn't be pinpointed, but government figures show since the end of 2012 an additional 130,000 permits for temporary foreign workers have been issued.

Statistics Canada confirmed the temporary foreign workers are included in the job creation numbers, but said non-permanent residents or non-citizens are put in an "other" category, which could include students, refugees or temporary foreign workers.

The department's Marie-Pier Desaulniers said that "other" category represents about two per cent of Canada's overall employment figures. Pinpointing firm numbers on how many temporary foreign workers are in Canada is difficult because Statistics Canada doesn't ask a worker's status.

Foreign workers counted

"The Labour Force Survey is a household survey," Desaulniers wrote in an email. "It is possible that some temporary foreign workers do not live in private households, but instead collective dwellings (for example hotels, motels), and therefore might not be included in the survey."

In 2011, the last census, 191,000 temporary foreign workers re-entered or entered Canada, according to a paper prepared by Melissa Pang in the Library of Parliament's Social Affairs Department. That brought the total number of temporary workers from abroad to 447,000.

Stanford said the unemployment rate is a poor indicator of the state of jobs in the country because it only counts those looking for work, meaning unemployed people who have given up their job search aren't included.

Stanford said the employment rate paints a more complete picture, and shows a drop from 63.7 per cent in 2008 to 61.3 per cent after the crisis, then alternating between 61 and 62 per cent from 2009 until 2013, until a steady downward slide through 2014. At the end of January, the employment rate was 61.4 per cent.

"Our labour market is as weak as it was in the worst days of the recession," he said.

He said the government's habit of comparing Canada's job growth to other countries is also misleading because Canada's population is growing at a faster rate than in some European and Asian countries, for example.

"They often stand up and say Canada has created jobs at a faster pace than other countries in the world like Germany and Japan," Stanford said. "But Germany and Japan don't have that problem because their population is stable... they could create zero net new jobs and still have a stronger labour market because they don't have to keep up with the population."

Stanford said Canada has been relying too much on the housing market and debt for Canada's economic prosperity. Too many Canadians are propping up the economy through purchases and relying on credit to get the money.

Diana Petramala, an economist specializing in real estate at Toronto-Dominion Bank, said housing and its spin offs do contribute to about half of the Canadian economy, but that is expected to slow over the next five years.

Lower dollar helps manufacturers

"We're going to see a slowdown in the pace of construction, the pace of home buying, so housing is going to contribute less to economic growth going forward," Petramala said. "We can't count on housing forever but the good news is on the other side of the coin we do expect other areas of the economy to start picking up now."

She said the hope is the lower Canadian dollar will bring some manufacturing back to Ontario, which has lost hundreds of thousands of jobs in the sector in recent years.

While unemployment in former manufacturing hubs in southwestern Ontario, such as Windsor, has hit more than nine per cent, other areas have had luck diversifying their economies.

London, for example, has managed to "significantly" improve its employment situation, bringing the unemployment rate from more than nine per cent in 2009 to 7.5 per cent at the end of last year.

Kapil Lakhotia, president and CEO of the London Economic Development Corp., said that was done by diversifying to higher tech manufacturing as well as the food and beverage industry.

"London was fortunate to be able to attract (food producer) Dr. Oetker from Germany, to build frozen pizzas in London," Lakhotia said, giving one example. "This is their first North American frozen pizza plant, so a very sizable investment in London."

Petramala said if a resurgence in southwestern Ontario does happen it could also lead to a slowdown in the Toronto housing market as more people leave to seek work in places like London and Kitchener.  [Tyee]

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