General Observations:
The first quarter of 2016 in Canada has been more of the same from last year. The economic hit in the oil patch has meant more layoffs, high paying jobs being replaced by lower paying jobs and a hit to the general economy. Changes in government have not had much impact on spending yet, although proposed “stimulus spending” is supposed to help (no commentary about our increased debt burden). We have also felt the lowered demand from foreign markets such as China as they have had their own economic issues to deal with. It has not all been doom and gloom as a weak dollar has helped some sectors such as manufacturing, 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 first quarter was unchanged from year end 2015, at 7.1%. During the previous 12 months, Canada added 130,000 jobs which was 28,000 less than the 12 months up to last quarter. When you consider the US is adding 200,000 jobs every month, we should expect to be adding 20,000 a month to keep pace.
The stock market continues to be volatile. I focus on the TSX for this report and it hit a low of around 11,500 mid-January but has trended upwards since then, finishing the quarter at around 13,500. This was 500 points higher than it finished last quarter.
The oil patch continues to take a pounding, with sentiment pessimistic about a near term recovery. Many of our Calgary-based clients are now talking about 2018 as their expected recovery time, with the impact of layoffs still being felt. We enjoyed the highs of $100+ per barrel, followed by lows below $30. Currently we are seeing low $40 a barrel pricing with predictions suggesting high $40s by year end. The impact on the Calgary economy has been significant and will get worse as severance packages dry up, and the same can be said for other areas with heavy dependence upon the oil industry.
To be expected with our economy struggling, the Canadian dollar has also suffered. Since the beginning of 2015 we have seen highs around 85c US, and lows at 69c US. Currently the dollar sits at 78c US, which is not terrible but as always the currency is at the mercy of world events. 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 continues to be a big user of talent and one of the largest employers in Canada. The primary demand for talent is in Toronto and to a lesser degree Montreal. While the competitive nature of the industry requires investment in innovation, technology and responsiveness to regulatory change there is also a need to control costs. We have seen some fluctuation in demand as certain parts of the financial sector have been reducing staff while others have been hiring. The banks have taken advantage of the economy to restructure and become more efficient, which is prudent business practice but again tough for the economy right now.
The telecommunications companies are big employers 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 in 2015 added 2.65 million jobs. This, in spite of the impact of a low oil price in their oil sector, has resulted in some skill shortages in certain areas. This may result in more Canadian skilled workers being lost from the Canadian economy but is an opportunity for individuals needing to find jobs.
The construction industry in Canada appears to remain healthy and 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. From cranes dotting the landscapes of our cities, through infrastructure work on our highways and home improvement projects everywhere the signs of an in-demand industry are plain to see. We hear that companies have benefitted from labour that was “freed up” due to lay-offs in the oil patch.
The Liberal government has been in place for about six months now and are beginning to make their presence known. We have seen tax increases and associated the benefit to the accounting firms as companies and high net worth individuals get more creative about reducing their tax burden. 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 is for January and indicates a slight increase in demand for labour over December, and a similar increase over January in 2015. This indicator is an aggregate of hours for all classes of labour and so it is my expectation that the impact has been greater on unskilled labour and that skilled talent has a much lower unemployment rate.
Here at Eagle the big impact on our business has been the oil patch. Year-over-year the number of people applying for jobs has increased by about 7% and there was a 32% increase in job applicants over last quarter. Demand from our clients was down year-over-year, with 10% less orders in the first quarter of 2016. That demand was, however, 18.5% higher than the 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 recovering, although that seems to be happening in sectors outside of the oil patch.
More Specifically:
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.
As already mentioned several times, in Western Canada it is Alberta, and more specifically Calgary as the “oil capital” of Canada, that has taken the brunt of the hit from the drop in oil prices. There have been numerous layoffs, and more are projected, with possibly another year before we see a recovery. These layoffs affect not just the oil companies but also the industries 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”. With the still relatively new Liberal government in place some projects that had been stalled have begun to move again, 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 and Business 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:
There had been hope that 2016 would see the start of a turnaround in the oil patch, but that seems to be a moving target, with 2018 seeming like a more realistic time line. The country is adding jobs, but the concern is that we have lost so many high paying jobs in the oil sector it is likely we are replacing them with lower skilled and lower salaried jobs.
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 unemployment rate at 7.1%, we expect the unemployment rate for trades and skilled workers to be much lower. 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. Edmonton is anxious because a large part of its business is tied to the provincial government and tax revenues are down significantly due to the oil crisis. The Conference Board, however, is suggesting that even Alberta will see GDP growth in 2016, with all provinces experiencing some modest growth. 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 CEO of Eagle (a Professional Staffing Company)
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