Bagnall: Capital region job market weaker than it seems, but budget could hold fixes
For most of the past 30 years, the capital’s jobless rate has tracked below that of the country.
It’s helped that two of the region’s most important economic engines – government and high-tech – have usually offset each other’s weak stretches. When government retrenched in the 1990s, the tech sector roared ahead. When telecom crashed in 2001, government picked up the slack.
But lately — and unusually — the twin sectors have both faltered.
It’s why so many people are hoping the Liberals’ March 22 budget will provide a catalyst through boosts to federal government hiring and procurement, or additional support for high-tech firms.
While everyone recognizes Ottawa and Gatineau are government towns, few appreciate the true extent of the dependence on taxpayers’ dollars. Last year, 20 per cent of the region’s 711,000 jobs were in government – more than triple the ratio in the country’s other large cities. Health and education accounted for 21 per cent of the capital region’s jobs – the highest in the country.
Ottawa and Gatineau also depend heavily on professional services contracts, often with government. This sector, too – with nearly 10 per cent of jobs — has seen significant employment declines during the past couple of years of Conservative budget trimming.
It would be nice to say the capital region will do just fine, no matter the budget plan tabled by Liberal Finance Minister Bill Morneau. However, the historical strengths of the local economy are being undermined by some unsettling trends.
Consider first just how few jobs are being created. Net employment gains from 2012 to 2015 were a paltry 2,300. Clearly some of this reflects the aftermath of former finance minister Jim Flaherty’s budget in 2012, when the Conservatives got serious about trimming government spending.
Since the region’s population grew at a much faster pace – up 43,000 over the same period – this should have produced a sharp rise in the jobless rate. Instead, it moved up marginally, reaching 6.5 per cent last year.
The unemployment rate didn’t run up higher because so many simply left the labour market. Workers took buyouts and retired, returned to school or pursued other interests.
This pattern took hold with the onset of the 2008 financial crisis and is by no means unique to the capital region.
However, the exodus here has been more pronounced. Last year 69.2 per cent of our population was in the workforce compared to 72.9 per cent in 2008. The rate of decline in the participation rate (as this metric is known) was twice that experienced across the country as a whole, and was the deepest among the largest cities.
The significance is that it makes the capital’s jobless rate artificially low. For instance, had the participation rate remained steady at 72.9 per cent, an extra 40,000 people would have been in the workforce last year – a good chunk of them looking for jobs. This would have boosted the jobless rate from the reported 6.5 per cent to anywhere between eight per cent and 11 per cent.
Another hidden weakness in the region’s job market concerns hours worked. For the first time in nearly a decade, the percentage of total jobs worked part-time in the capital region — 19 per cent — exceeded the national ratio. Part-time employment has been on the rise locally and nationally since 2008. Here, too, the pace of the increase has been faster in the capital area.
Despite all this, there’s reason for hope. If the past economic cycles are any guide, the capital can recover quickly. A little priming of the federal government pump translates directly into a more robust job market.
The construction sector is a perfect example. All three levels of government are funding multiple major projects, ranging from the $2-billion light rail transit project to the $110-million refurbishment of the National Arts Centre. For the first time in many decades, more people earned their living last year doing construction than high-tech.
With the Liberals intent on financing more infrastructure projects, the construction sector looks well-placed to continue hiring. Whether it will remain heftier than high-tech is unclear.
The tech sector’s champions insist the cycle will turn again in their favour, as long as the Liberals do nothing to hurt their chances such as eliminating favourable tax treatment for stock options. A little help in the form of better access to risk capital would be even better.