It’s almost as if the recession has caught up with la belle province.
Economists are at a loss to explain why Quebec, which limped through the slump but didn’t suffer the extent of job losses as elsewhere in Canada, is suddenly seeing deep cuts.
But the trend is clear. While a single month of job losses could be dismissed as a statistical blip, three consecutive months of declines – from October to December at a cost of almost 70,000 positions – can’t be.
Employment in Quebec slipped in the recession years, but not to the extent of other provinces. The province has now tallied its steepest three months of job cuts since the slump of the early 1980s. Its unemployment rate has soared to 8.7 per cent from 7.3 per cent in September, above the national average and the highest in more than two years, threatening to dent consumer confidence and hamper growth prospects in Canada’s second-most populous region.
Troubling, too, is that the cuts have been broad-based, rather than in a single sector. Data crunched by Statistics Canada show the losses have occurred in the retail, scientific and professional and construction sectors, among others.
A confluence of factors appear to be at play, from still-weak U.S. demand to the wind-up of government spending on infrastructure and global challenges that are slamming the province’s forestry and manufacturing sectors.
While the sudden plunge has puzzled economists, some say a high cost of doing business is another key factor.
“Unit labour costs or the costs of producing here, with wages of $25 or $30 an hour, is not as viable for these businesses as it used to be, because of technology and emerging markets,” said Sébastien Lavoie, assistant chief economist at Montreal-based Laurentian Bank Securities.
The string of sour news started more than a year ago. Shell Canada closed a Montreal refinery, while Swedish appliance maker Electrolux AB said it would close its factory in L’Assomption, laying off 1,300 workers as it moves to operations to Memphis, Tenn., where labour costs are lower.
This week, both Johnson & Johnson and Sanofi announced hundreds of cuts in the Montreal area. Looking ahead, the federal government plans on trimming thousands of public sector jobs, a move that will impact workers in the Ottawa-Gatineau area.
Labour strife is also heating up. In November, White Birch Paper Co. shut its newsprint plant in Quebec City indefinitely, with a loss of 600 jobs, citing high salary and pension costs. And earlier this month, Rio Tinto Alcan locked out 800 workers at its smelter in Alma, Quebec.
Still, reasons for why Quebec was comparatively so hard-hit in recent months are tough to fathom, says Simon Prevost, Montreal-based president of the Quebec wing of Canadian Manufacturers & Exporters.
“This is quite unusual, given that the Quebec economy continues to grow, albeit not dramatically.”
As far as the manufacturing sector is concerned, he said Quebec companies are perhaps reacting more cautiously than elsewhere to the lingering uncertainty of the sustainability of the U.S. economic recovery and sovereign debt crisis in Europe.
“My members are voicing a lot of worry about the global economy and the slowness of the U.S. recovery, where most of their exports go,” he said. “There’s a lot of investment and expansion of operations that have been put on ice and that translates into layoffs and production cutbacks.”
For example, a company that had been running seven days a week will cut back to a five-day week or scale back to two eight-hour shifts from three shifts.
“There’s a hesitancy to embark on big projects,” he said.
It’s almost as though there is a delayed reaction to the effects of the 2008-09 recession, Mr. Prevost said.
Numbers so far suggest Quebec has stalled, not fallen into a recession. The province grew just 1.3 per cent in the third quarter of last year at an annualized rate, compared with an annual rate of 3.5 per cent for all of Canada, Quebec’s Institute of Statistics figures show.
The weakness is centred in the private sector. Five months of head-count declines in the private sector amount to 103,000 positions, the worst drop ever, according to Stéfane Marion, chief economist at National Bank of Canada.
But the weak employment numbers don’t jibe with some other data on the province, which show retail sales, manufacturing sales, business sentiment and housing starts holding up, he said. Mr. Marion thinks the province’s employment levels will rebound..
Still, others see rough times ahead for Quebec’s laid-off workers, many of whom had high-paying jobs that have disappeared, and lack the skills to land new ones. “The challenge now is these people had those jobs for 20 years. And now, a mismatch between the unemployed and job postings is going to delay their reentry into the labour market,” Mr. Lavoie said.
Growth prospects are seen as lacklustre this year. Royal Bank of Canada, for one, has chopped its growth forecast for Quebec to 1.8 per cent this year, compared with 2.5 per cent for Canada as a whole, citing concern that a deteriorating provincial job market will dampen consumer confidence this year.
Chief economist Craig Wright sees a “continued challenge” for U.S.-dependent, manufacturing economies in Central Canada. He too is a little suspicious of the numbers, given a volatile pattern in the past two years showing huge job creation in the start of the year that peters out at the end. More clarity should emerge with the release of the next jobs numbers in early February, he said.
For now, the three-month drop in employment has happened in retail, professional services, health care and social services, construction, manufacturing along with information and culture sectors, Statscan’s analysis shows.
The agency also examines longer-term trends since last spring. It found the province’s declines were in health care, information, business support services, finance, professional services, manufacturing and construction.
Fraser Institute’s latest index of economic freedom – which tracks government size, taxation and labour flexibility – puts Quebec in 58th place of 60 jurisdictions in the U.S. and Canada.