This Week’s Unanswered Question 2 (021206): On Canada’s Economy
QUESTION 2: Why haven’t we heard anything about the troubles of Canada’s manufacturing sector and the entire eastern half of its economy?
You think we have problems? Check out Canada.
First, its manufacturing sector is in the tank:
Manufacturing loses most jobs in 15 years
TAVIA GRANT - Globe and Mail UpdateCanadian manufacturers struggled under the weight of a strong currency and foreign competition in January, cutting 41,600 jobs in January. It was the sharpest decline since February, 1991, according to Statistics Canada.
Of those January cuts, 33,000 occurred in Ontario, the country’s manufacturing heartland.
Those reductions come on top of more than 100,000 job cuts last year, with two thirds of those in Ontario.
The Canadian Labour Congress called the manufacturing decline a “crisis.”
Since the end of 2002, employment in manufacturing has dropped by 8.2 per cent because of a strong Canadian dollar and heated competition from abroad.
The article goes on to note that total employment in the entire economy continues to go up. But the apparently rapid shift away from manufacturing has to be troubling for those affected, and predictions are that another 100,000 manufacturing jobs will be lost this year too — in a nation with about 11% as many people as the U.S.
Second, Canada appears to have develpped two distinct economies, one that’s struggling mightily in the eastern half of the country, and the other in the western half that is nearly at what economists consider full employment (i.e., when unemployment is in the 4%-5% range).
Canada’s nationwide nemployment stands at 6.6% (quite a bit above our current 4.7%), but how it varies in different parts of the country is stunning. Here are the figures, moving from east to west across the nation’s provinces, with the January 2006 rate listed first, and December 2005’s rate in parens (from the same link as the manufacturing information excerpted above):
— Newfoundland 16.5 (15.4)
— Prince Edward Island 10.8 (11.1)
— Nova Scotia 7.8 (8.5)
— New Brunswick 8.9 (9.6)
— Quebec 8.4 (8.2)
— Ontario 6.5 (6.2)
— Manitoba 4.3 (4.2)
— Saskatchewan 5.2 (5.3)
— Alberta 3.5 (4.2)
— British Columbia 5.1 (5.1)
I would not be at all surprised to find out that the western half’s economy is performing much better because it is less shackled by bureacracy and regulation than the eastern half.
As to the question of this post, I believe that the business press is reluctant to criticize Canada’s economy because of its sacrosanct (as far as American liberals are concerned) nationalized health care system. Dumping on Canada’s economy implicitly means dumping on what liberals still consider to be the Holy Grail of health care.
Excellent post!
Having visited Toronto recently, I saw first hand that Canada, like the U.S., is tranforming itself to a service-oriented economony.
From http://www.economywatch.com/world_economy/canada/ :
“More than two-thirds of the country’s output is contributed by the Services sector, which employs nearly three-quarters of the working population.”
Also this (http://ideas.repec.org/a/sls/ipmsls/v7y20037.html):
“In the third and final article in the Symposium included in this volume on Future Productivity Growth in Canada, Benoît Robidoux from Finance Canada observes that there has been a structural improvement in labour productivity growth in Canada since 1996 and that it is likely that this stronger productivity growth of around 2 per cent per year will continue. He points out that future productivity growth in Canada will increasingly depend on productivity trends in the expanding service sector, and in particular on the ability of this sector to incorporate information and communication technologies into the production process.”
I think that transformation of the economies (both U.S. and Canadian)have to be factored in to provide the full picture.
Comment by Porkopolis — February 12, 2006 @ 12:39 pm
#1, thanks, and I agree that the service sector needs to be considered, and obviously given the credit for being able to absorb a lot of the manufacturing jobs. I’m not sure 2% productivity growth is anything to crow about, but I’d have to research further.
The stunningly low unemployment in the west half vs. the very high unemployment in the east half, esp the far eastern provinces, is probably the bigger story of the two.
Comment by TBlumer — February 12, 2006 @ 1:49 pm
As I’ve said before, if they fall apart, we should annex Alberta, but nothing else.
Comment by nixguy — February 12, 2006 @ 3:32 pm
#3, NO BC? The home of the rock band “Heart”?
Comment by TBlumer — February 12, 2006 @ 4:32 pm