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economic insight

ConocoPhillips Co. and other producers have already announced new spending cuts in December and warned of another round of cuts if oil prices continued to sink.Nathan VanderKlippe/The Globe and Mail

The outlook for Canada's labour market is murky, with the devastation in the energy industry spreading to other businesses across the country.

This Friday's jobs report will provide another look at the country's labour force and fallout from the plunging oil prices. Economists, on average, are looking for a net increase of 10,000 jobs across Canada in December, according to Bloomberg data. But that would only partially make up for the 35,700 net job losses in November, and the unemployment rate is expected to hold steady at 7.1 per cent.

Energy-rich Alberta has taken the brunt of last year's job losses, and all signs suggest the province's dismal labour market will not improve this year.

The western province's jobless rate has reached the highest level since the Great Recession. Twice as many Albertans are receiving employment insurance benefits compared to a year ago and the province's average weekly pay is falling.

The most recent jobs report issued in December showed that the pain had spread from natural resources to other parts of Alberta's economy. The province showed employment declines across sectors from finance and real estate to trucking.

"A lot of the damage will be in Alberta. We haven't seen all of it yet. It's coming," said Benjamin Tal, deputy chief economist with CIBC.

Nearly 20 energy companies believe they will lay off more staff and slash spending further if oil prices do not recover, according to an energy industry group.

Companies like Cenovus Energy Inc. and ConocoPhillips Co. already announced new spending cuts in December and warned of another round of cuts if oil prices continued to sink.

Crude has lost half its value over a 15-month period. Once worth $100 (U.S.) per barrel, oil is now trading below $40 per barrel.

However, it's not just Alberta feeling the sting of the weak commodity prices. The slump in other resources such as fertilizer, iron ore and coal has taken a toll on the east coast and the prairies. Saskatchewan's unemployment rate climbed to 5.5 per cent in November from 4.5 per cent in January. Ontario-based companies that service the oil patch are also hurting, even though natural resources contribute very little to the province's economy.

"One of our main sectors is manufacturing for the oil and gas industry," said Mike Whatling, plant manager with privately held Niagara Precision Ltd. "It's probably down 80 per cent over a year ago," he said.

Niagara Precision also supplies parts to other industries, such as the military, auto and aerospace, which has helped soften the blow. But Mr. Whatling said it is still a "big drop."

About 30,000 natural resources jobs have vanished over the first 11 months of the year. The construction sector shed 16,000 jobs over the same period. Meanwhile, manufacturing added nearly 30,000 new jobs and health care created 69,000.

Both sectors helped mitigate the deep declines in the energy sector, leading to a tepid year of job creation.

Unfortunately, manufacturing and health care will not replace the thousands of jobs lost in the energy sector.

"Health is the responsibility of the provinces and the provinces are not in a spending mood," said Mr. Tal. "I don't see exactly what the engine for economic growth and job creation in Canada will be in 2016. I expect the labour market not to be extremely strong," he said.

As for the manufacturing sector, the weak Canadian dollar has yet to attract huge amounts of private investment.

"I doubt that we can count on that sector to be a job-growth leader. Those days are most likely long gone," said Douglas Porter, chief economist with Bank of Montreal.

"U.S. manufacturing is struggling with the strong U.S. dollar, and much of our factory performance is tied in with the relative success of the U.S. industry," he said.

There were other major job declines in the country. U.S. discount retailer Target's decision to pull out of Canada led to thousands of job losses in the retail sector.

A spurt in public administration employment was attributed to October's federal election and those jobs vanished the following month.

Canada's labour market contrasts sharply with the United States, which has seen strong growth.

The U.S. unemployment rate fell to 5 per cent late in 2015, the lowest level in seven and a half years.