Nicolas Van Praet - You never have to look far to count the ways in which Quebec breaks with the rest of the country.
Quebecers watch more television than Canadians in any other province, due to a thriving French-language broadcasting industry that regularly draws more than a million viewers for its top shows. They’re the least-stressed, play hooky from work the most, and traditionally have the lowest rate of homeownership.
But Statistics Canada numbers released Friday show Quebec is also splitting from other provinces on job creation, registering another employment decline in December while the rest of the country was either up or flat. Quebec’s jobless rate stands at 8.7%, higher than that of the United States.
The question now is whether the gap with other provinces will narrow in the coming months, or whether we’re seeing evidence of a starkly divergent jobs picture that will settle in longer term.
Quebec lost a further 26,000 jobs in December, the third straight month of declines. It is down about 70,000 jobs from October to December, the worst three-month performance since the recession of 1981-1982. The economic contraction that year became a “day of reckoning” for the union movement and the provincial government, according to economist Pierre Fortin, ushering in a prolonged period of wage moderation and peaceful labour relations.
“Clearly this is disconcerting” because it is a recessionary reading, said Stéfane Marion, chief economist at National Bank Financial in Montreal. “The puzzling part of the equation for us is that there is a big divergence between Quebec and the rest of Canada that is very, very unusual. Virtually unseen before.”
Adding to the puzzle is that other data points for Quebec are positive. Partial data for the fourth quarter shows retail sales were up in the province. Meanwhile, home starts were also robust while home resale activity was relatively strong, Mr. Marion noted.
“When you have a reading of this magnitude for employment, normally that should be accompanied by a plunge in retail sales and activity domestically. And we’re not seeing that.” He says it may be a statistical anomaly that might rebound next month, given a more positive trend line overall for Canada and the United States.
Others aren’t so sure.
“It cannot be a blip” when Quebec employment has declined this severely, said Sébastien Lavoie, assistant chief economist at Montreal-based Laurentian Bank Securities. “And the story is really in the private sector.”
In many cases, the province’s job losses are being driven by companies that are losing ground in terms of international competitiveness and are laying off staff to lower their labour costs, Mr. Lavoie said. Trois-Rivières, Que., where pulp and paper companies are battling a sectorial decline, tops the municipal unemployment rates with 9%.
Mr. Lavoie believes the employment shift started when Swedish appliance giant AB Electrolux announced in December 2010 that its Montreal manufacturing plant was “not a viable site” cost-wise and that it would transfer production to a new factory in Memphis, Tenn. The decision marked a decisive loss in the battle over manufacturing jobs to the U.S. south as the strong loonie jacks up payroll costs for domestic employers.
More recently, insolvent paper maker White Birch shut its Quebec City area plant, affecting 600 workers. And Rio Tinto Alcan locked out 780 workers at its Alma, Que. aluminum facility last week as it fights to contain costs by using subcontractors.
Firms in Quebec have not adjusted staffing numbers to the same extent as those in the United States did two or three years ago, Mr. Lavoie said. And they’re laying off employees now as as the economy slows. U.S. employers are hiring people because they’re at payroll bottoms and need more staff as demand recovers.
“The problem now is that the persistency in the higher unemployment seems to be more firmer this time than during the 2008-2009 downturn,” Mr. Lavoie said. “Many people just don’t have the qualifications now to find themselves another job quickly. So we’ll probably see a growing mismatch between the unemployed and the job postings out there.”
The overall labour picture Canada-wide was a mildly positive one for December.
The economy added 17,500 jobs on balance, fewer than expected but still a welcomed reversal from the decline over the previous two months. Manufacturing gained 30,000 positions after shedding almost 80,000 over the past three months. Economists had expected 20,000 jobs to be added on a net basis.
Canada’s unemployment rate edged up to 7.5% from 7.4% because more people jumped into the labour market looking for work.
Canadian employment growth totalled 1.2% for 2011, with nearly all of the gains in the first half of the year, Statistics Canada said. That underscores the fact the broader economy is only growing modestly at best, said Douglas Porter, deputy chief economist at BMO Capital Markets.
Canada’s gross domestic product — the broadest reading of economic performance —was unchanged in October, following four consecutive monthly increases. Economists expect tepid growth for 2012.
There’s a good chance the European debt crisis will escalate this year and no province will be immune from the resulting events, TD Bank economist Derek Burleton said. “In that kind of environment, I don’t see any real reason to think that Quebec’s economy is going to experience much greater headwinds [than anywhere else],” he said. “Yes, it’s likely to underperform. But I don’t see a real schism opening up here between Quebec and the rest of the country. The next few months will be very telling as to whether this weakness is more short term in nature of whether there’s something more serious taking shape.”