General Observations:
There were some positive signs from the second quarter of 2016, but that sentiment by no means suggests it has been a booming market. Despite some slight increase in oil prices we have seen no positive effect on jobs in the oil patch, and the lack of government support means that confidence in the sector is still low which will result in less potential for investment. The Fort McMurray fires just “piled misery on” for an already beleaguered province, costing more jobs and lost productivity. We have not yet seen any stimulus in employment from promised government spending, although it is possible we just haven’t seen it. The Brexit decision caused ripples in the market, much debate and has had had no impact on employment yet. It may become an area of opportunity, but that remains to be seen. The weak dollar has helped some sectors such as the oil patch and the manufacturing sector, plus it is still business as usual for other sectors like the services sector, retail, banking, construction and telecommunications.
The unemployment rate at the end of the second quarter was improved to 6.8% from the Q1 rate of 7.1%. During the previous 12 months, Canada added 108,000 jobs which was 22,000 less than the 12 months up to last quarter. It is worth noting that the US continues to add jobs at a rate of 200,000 jobs every month, so we should expect to be adding 20,000 a month to keep pace (so 240,000 jobs in the last 12 months should be an expectation)!
The stock market continues to be volatile, and had an interesting ride with the Brexit announcement. Having said that, things have generally settled down in the markets. I focus on the TSX for this report and it ended Q2 at around 14,100 points which was up about 600 from the end of Q1.
As already mentioned the oil patch continues to take a pounding and we don’t anticipate much positive change before 2018. With oil starting to settle at around $50 a barrel we should see some activity but it will need to settle there for a while before companies act. Many companies are looking at divesting Canadian assets and investing in other geographies with less opposition and more government support. Many workers who migrated to the oil patch during the boom have left, and they will be difficult to replace when a recovery does happen.
The Canadian dollar in comparison to the US dollar is a long way from the days when we flirted with, and passed parity. At time of writing the dollar is worth about 76c US, which is just a couple of cents weaker than the end of Q1. The good news is that this helps the oil patch because they sell in US dollars and most costs are in Canadian dollars. It is also helpful to our manufacturing sector. Exporters will enjoy favorable pricing too; however, exports have been adversely affected by the economic woes of our trading partners like China.
The banking sector, while a big user of talent and one of the largest employers in Canada is also very careful. Recent initiatives have seen the banks rationalizing their workforce to ensure they are competitive. Toronto and Montreal continue to demand talent, just perhaps a little more restrained than in other times.
The telecommunications companies are another big employer in Canada and are also very cost conscious. While they demand the best talent in order to compete, they are also careful about keeping employment costs under control. Some of the drivers of demand here include the highly competitive nature of the business, investment in infrastructure, technological innovation and a need to plan for a retiring “Boomer” workforce. The recent purchase of Wind by Shaw might increase competition and potentially open up opportunities should all of the regulatory approvals go through.
The US economy has been adding more than 200,000 jobs a month and while there were a couple of slower months in this last quarter, they made up for it in June. The result is that the US is still adding 200,000 jobs a month on average. The demand for skills in the US will lure talent from Canada which is good for the individuals but not so good for Canada in the long term.
The construction industry seems to be forever busy, to which anyone trying to get work done will attest. Despite the slowdown in the big jobs like the oil sands, there appears to be a constant demand caused by infrastructure upgrades in many of our cities and we have the promise of more such work funded by our growing national debt (was that my out loud voice?). Anecdotally I have seen numerous Alberta plated cars on job sites around the GTA, which supports the theory that many workers have come back from the oil patch and are finding work elsewhere.
The Liberal government has been in place for about nine months and are continuing to both spend and raise taxes. There are some expected government projects and infrastructure spending initiatives that should benefit the private sector. In addition, spending in some ministries will be reduced as others benefit from the new agenda. Some opportunities will be seen in sectors such as health, environment and education.
The Canadian Staffing Index is an indicator of the strength of the largest provider of talent in any economy (the staffing industry) and an excellent barometer of the health of Canada’s economy. The latest score for the Index is 106 in June. This indicates a 3% month over month increase in demand for labor and a 5% year over year increase.
Here at Eagle the big impact on our business continues to be the oil patch, but also many clients are taking advantage of a tough economy to look at their cost base. This can lead to some layoffs and slower hiring patterns. Year-over-year the number of people applying for jobs has increased by about 3% and there was a 7% decrease since the last quarter. Demand from our clients was down 4% year-over-year, and also down 3.5% from last quarter. This suggests to us that the people affected by the layoffs are now active in their job searches. We also believe that demand is very patchy, with no sectors booming in demand for professionals.
More Specifically:
There is really very little change from my report last quarter. This is the one market in Canada that has a continual demand for talent. Toronto is the 5th largest city in North America with a population exceeding 6 million. The GTA (Greater Toronto Area) is home to the most head offices (almost 700) in Canada and most head office staff (around 75,000). Consequently it is also the hottest job market in Canada and generates about 60% of Eagle’s business. While it remains a busy market we have seen some impact from downsizing in large companies that has increased the availability of senior people in the market. Having said all that, if I were looking for work this is where I would like to be. The sectors that are always looking for people include the financial, insurance, government and telecommunications sectors in addition to the retail sector and the construction industry. There is also a fair amount of demand in the engineering and manufacturing space.
Again very little change from last quarter. Western Canada and more specifically Calgary as the “oil capital” of Canada, has taken the brunt of the hit from the drop in oil prices. There have been multiple rounds of layoffs, and more are projected, with the possibility that it may be 2018 before we see a recovery. When the big oil companies are hurting there is a trickle-down effect to all of the services companies that serve them and the local economy gets affected in retail and housing specifically. The NDP government has done nothing to help boost confidence in Alberta for investors. It should not be forgotten that both Saskatchewan and British Columbia have an oil sector too, and while they have been equally hit those provinces, seem to be doing better because their economies are less dependent on one sector. We have seen reasonable, but not strong, demand for talent in Vancouver, Regina, Winnipeg and Edmonton but remain cautious about the longer term impact of the loss of oil revenues. This could affect everyone as provincial tax coffers suffer and the ancillary businesses are hit.
Eagle’s Eastern Canada region covers Ottawa, Montreal & the “Maritimes”. There is a better mood in Ottawa and within the Federal Government (other than the morale issues caused by a non-functioning pay system) but that has not translated into a bunch of work, as we know the contracting process is long and arduous. There is an expectation that the Liberal government will get some projects back on the books, and there is optimism that a new agenda will lead to more business in the National Capital Region specifically. Montreal is relatively unchanged, not booming but a steady demand for resources, particularly in the financial and telecommunications sectors. The Maritime Provinces have traditionally had higher rates of unemployment and this is not changing much so work is tough to find.
The Hot Client Demand.
At Eagle our focus in on professional staffing and the people in demand from our clients have been fairly consistent for some time. That would include Program Managers, Project Managers andBusiness Analysts who always seem to be in demand. It might just be our focus, but Change Management and Organizational Excellence resources are in relatively high demand too. Big data, analytics, CRM, web (portal and self-serve) and mobile expertise (especially developers) are specializations that we are seeing more and more. On the Finance and Accounting side, we see a consistent need for financial analysts, accountants with designations and public accounting experience plus controllers as a fairly consistent talent request. Expertise in the Capital markets, both technical and functional, tends to be a constant ask in the GTA. Technology experts with functional expertise in Health Care is another skill set that also sees plenty of demand. This demand fluctuates based on geography and industry sectors, so we advise candidates to watch our website and apply for the roles for which they are best suited.
Summary:
The basic message is … more of the same! The oil patch continues to be in trouble with 2018 the latest target for a recovery of sorts. Statistics show there are jobs being added in Canada, but the numbers are not impressive particularly when you see how the US is doing.
Federal and provincial governments are talking about stimulus spending and infrastructure projects, so there is an expectation this will create some boost to the economy. If interest rates remain low, as expected, and the dollar remains fairly low, then we might also see some further growth in Canada’s relatively small manufacturing base.
With Canada’s overall unemployment rate at 6.8%, we can deduce that the unemployment rate for trades and skilled workers to be much lower, perhaps even approaching skill shortage levels. Even in these uncertain times we see shortages in niche skill areas.
There are definitely still opportunities created because of the demographic pressures (retiring Boomers) and the need for companies to remain competitive. We see opportunity in the construction industry, the financial sector, the telecommunications sector and the insurance sector. We see the markets with the greatest demand as being Toronto, Vancouver and perhaps Montreal. Ottawa is showing promise and could pick up if new projects are initiated by the new government. Government spending will also provide a boost to employment as the stimulus money becomes available.
That was my look at the Canadian job market for the first quarter in 2016 and some of its influences.
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Kevin Dee is the founder and Chairman of Eagle (a Professional Staffing Company)
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