Short- Term Employment Growth Forecast (as at February 19, 2015)

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1 Background According to Statistics Canada s Labour Force Survey records, employment conditions in Newfoundland and Labrador showed signs of weakening this past year. Having grown to a record level high of 242,700 in 2013, employment levels in the province dropped by - 4,100, or - 1.7%, to stand at 238,600 in In this same period the unemployment rate edged up slightly by 0.3 percentage points, from 11.6% in 2013 to 11.9% last year. Given the rapidly changing economic conditions in the province and across Canada over the past year these changes can be expected. Factors such as plunging oil and mineral prices and a depreciating Canadian dollar have given rise to significant economic volatility throughout the country, especially for heavily resource- dependent provinces like Newfoundland and Labrador. While major construction projects will continue, with Alderon s Kami iron ore mine and Muskrat Falls expected to reach peak employment in 2015, most are expected to wind down by 2018, declines of capital investment and employment are happening in other projects. The ongoing public discourse on the recent and anticipated impacts of the changing economic environment reflects a growing climate of unease and uncertainty about Newfoundland and Labrador s economic future, including the employment outlook. While there is no crystal ball to provide these answers, an examination of labour market conditions over the past fourteen years can provide a much stronger foundation to help assess the potential impacts of the current environment than reliance on the province s performance in any single year or one point in time. Economic conditions obviously have a significant influence on employment prospects and outcomes, but shifting dynamics within the labor market, such as the impacts of demographic trends, can also play a major role. On January 28, 2015 Statistics Canada released its revised Labour Force Survey estimates for the 2001 to 2014 period based on the Census 2011 versus the 2006 population estimates. This is very timely as it now allows for a more reliable examination of changing labour market trends and dynamics, particularly over the past 14 years. ( partie1- eng.htm) Collaborative Applied Research in Economics 1

2 Employment Outlook In an historical context, near term employment outlook may not be as bleak as some may perceive. The earliest available data from Statistics Canada s Labour Force Survey recorded employment levels in the province at 158,800 in 1976, with less than half the working- age population (15+ years) participating in the labour force (49.4%) and an employment rate of 42.8%. Over the next quarter century employment had grown by 30.3% to a peak of 206,900 in As many Newfoundland and Labradorians can still vividly recall, the next decade brought forth one of the most difficult economic periods in the province s recent history due to the devastating impacts of the fishery collapse and recession. Employment rapidly dropped by - 8.7% over the next six years to stand at 188,800 in 1996 and out- migration rates reached historical highs, especially among young, working- age people. At the start of the 21 st century, the province was well on its way to recovery and, for the most part, there has been consistent growth since that time. i Despite the recent downturn in 2014, employment levels remain 20% above those recorded in In light of the recent volatility of the provincial economy, revised short- term employment forecasts from the private and public sectors have been released in the last several months. While employment is expected to drop, the short- term outlook may not be as bleak as some may perceive. Short- Term Employment Growth Forecast (as at February 19, 2015) Sector 2015f 2016f 2017f Source Private Sector TD Economics % % EconomicUpdate_Jan2015.pdf RBC 0.30% (high) % (low) reports/pdf/provincial- forecasts/provupd2015.pdf CIBC World Markets % (low) % (high) nprovinces.pdf Provincial Government 1.00% % % f Under the lowest case scenario, employment is expected to drop to 234,561, or by - 1.7%, by The most optimistic forecast has employment declining to 238,119, or by - 0.2%, in this period. All the current scenarios maintain employment levels well above those observed in 2000, and above those recorded following the 2008 global recession, at least for the near term. Collaborative Applied Research in Economics 2

3 Employment Outlook Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) Collaborative Applied Research in Economics 3

4 LABOUR MARKET CHARACTERISTICS & CHANGING DEMOGRAPHICS Changes in participation, unemployment and employment rates well outpace the rest of the country. Compared to the 1990 s, Newfoundland and Labrador has experienced above average employment growth since Relative to the rest of the country however, employment growth between 2000 and 2014 comes in just below the Canadian average (Chart 2). Chart 2: Change in Employment (Population 15+), 2000 to 2014, Canada and the Provinces 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 43.7% 20.7% 20.6% 20.0% 19.4% 18.3% 18.0% 17.8% 13.5% 8.7% 6.7% AB SK Canada NL QU ON BC PEI MN NS NB Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) In contrast, the province has made significant strides in closing the gaps with respect to its employment, participation and unemployment rates compared to other Canadian jurisdictions, (Charts 3 through 5). Low participation rates averaging 54.4% in the 1990s captured the bleak outlooks of discouraged workers who had given up engaging in the job market. Newfoundland s growing participation rate since 2000 bodes well for the economy, as it signals more people are actively pursuing potential career options and are optimistic about their employment prospects. This has been boosted by a flurry of construction projects, employing rural workers and boosting the communities that surround them. While there are still large construction projects on the horizon, such as a new hospital in Corner Brook and development of the Maritime Link in Western Newfoundland, relying on such temporary employment will add to the volatility of the province s economy. Collaborative Applied Research in Economics 4

5 LABOUR MARKET CHARACTERISTICS & CHANGING DEMOGRAPHICS Chart 3: Employment Rates (15+ pop), Canada and the Provinces, 2000 to % 70.0% 65.0% 60.0% 55.0% 50.0% 45.0% 40.0% 35.0% 30.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% 45.0% 40.0% 35.0% 30.0% 68.6% 69.3% 53.8% 46.3% Chart 4: Participation Rates (15+ pop), Canada and the Provinces, 2000 to % 72.7% 61.0% 55.5% Canada NL PEI NS NB QU ON MN SK AB Canada NL PEI NS NB QU ON MN SK AB 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 16.6% 5.0% Chart 5: Unemployment Rates (15+ pop), Canada and the Provinces, 2000 to % 3.8% Canada NL PEI NS NB QU ON MN SK Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) Collaborative Applied Research in Economics 5

6 Changing demographics are impacting labour market trends. Demographic trends have played a key role in driving changes observed in the province s employment, participation and unemployment rates. Between 2000 and 2014, Newfoundland and Labrador experienced the slowest rate of growth among its working- age population (15+ years) compared to other provinces (Chart 6). As a result, and as shown in Chart 7, labour force growth (13.7%) did not keep pace with employment growth (20%) in this period, serving to drive participation rates faster than elsewhere. Emerging labour demands in the last 14 years were met in part by the pool of unemployed people already in the labour force. The number of unemployed people decreased by % between 2000 and 2014 (Chart 8) helping drive unemployment rates downwards. About 55% of the labour force growth observed in this period was a result of new entrants from the existing population (15+ years old) not in the labour force, which shrank by - 9.4% (Chart 9). New entrants to the provincial labour supply, from youth and outside the province, accounted for just 45% of labour force growth since As a result, employment rates also escalated more quickly in the province than in other areas of the country. Chart 6: Change in Working- Age Population 15+, 2000 to 2014, Canada and the Provinces Chart 7: Change in Labour Force (15+ years), 2000 to 2014, Canada and the Provinces 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 20.3% 3.4% 12.8% 5.9% 3.9% 15.5% 22.4% 14.1% 14.1% 42.3% Canada NL PEI NS NB QU ON MN SK AB BC 19.3% 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 20.7% 13.7% 16.0% 8.6% 6.7% 18.4% 20.3% 14.0% 19.1% 43.2% Canada NL PEI NS NB QU ON MN SK AB BC 16.6% Chart 8: Change in Unemployment (15+ years), 2000 to 2014, Canada and the Provinces Chart 9: Change in Not in Labour Force (15+ years), 2000 to 2014, Canada and the Provinces 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% % % % 22.2% % 2.3% 7.3% 6.3% 8.0% 52.6% 24.0% % 34.7% Canada NL PEI NS NB QU ON MN SK AB BC - 1.5% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% % % 19.5% - 9.4% 6.5% 1.7% - 0.5% 10.6% 26.7% 14.3% 4.1% 39.7% Canada NL PEI NS NB QU ON MN SK AB BC 24.2% Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) Collaborative Applied Research in Economics 6

7 Changing demographics are impacting labour market trends. Women continue to account for a growing share of employment, but gaps remain. Between 2000 and 2014, employment growth among women (24.7%) outpaced growth observed among men (15.9%). Overall, women accounted for 57.8% of employment gains during this period. Despite these gains, women still account for less than half of all employment in the province (48.7%) while representing approximately 50.9% of the total population 15+ years old. Chart 10: Share of Employment By Gender, Population 15+ years, NL, 2000 to 2014 Males Females 54.0% 52.0% 50.0% 48.0% 46.0% 44.0% 53.1% 52.2% 52.2% 52.0% 52.3% 52.0% 46.9% 47.8% 47.8% 48.0% 47.7% 48.0% 51.1% 51.7% 51.8% 51.1% 50.4% 51.3% 51.6% 51.6% 51.3% 48.9% 48.3% 48.2% 49.0% 49.6% 48.8% 48.4% 48.4% 48.7% 42.0% Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) Collaborative Applied Research in Economics 7

8 Changing demographics are impacting labour market trends. Population aging one of the strongest factors shaping provincial labour markets. Between 2000 and 2014 population aging has had a stronger impact on the provincial labour force than elsewhere in Canada. As shown in Chart 11, the share of the labour force aged 45 years and older grew from 32.3% in 2000 to 45.9% in Comparatively, the share of this age group in the Canadian labour force grew from to 32.5% to 42.4%. Chart 11: Share of the Labour Force Employment by Age Group, Canada and NL, 2000 and to 24 years 25 to 44 years 45 to 64 years 65 years and over 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 1.4% 3.7% 0.7% 3.6% 31.1% 38.7% 31.6% 42.3% 51.0% 42.6% 52.3% 41.2% 16.5% 15.0% 15.4% 12.9% Canada NL Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) Population aging is also evident among those employed in the province. Since 2000, the strongest employment growth has been reported among those 45+ years old while employment decreased slightly among the 25 to 44 year old age group. On average, 32.1% of those aged 45+ years old were employed in the 1990s. This has increased 32.4%, with 42.5% of this age group employed in There are several factors for this change. Improved health care and longer lives has motivated older workers to remain in their professions longer. However, higher participation rates may also imply less income security in retirement, forcing workers to return to their professions or find employment in low- skilled occupations. 300 Chart 12: Employment, Average Annual, by Age, NL, 2000 to to 24 years 25 to 44 years 45 to 64 years 65 years and over Employment, 000's Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) Collaborative Applied Research in Economics 8

9 Changing demographics are impacting labour market trends. Retirements among older workers will help offset the impacts of employment losses and potentially create new job opportunities for the unemployed and new labour market entrants. As seen in Chart 13, about 43.9%, or 47,800, of employed individuals above the age of 45 were 55 years of age or older in This group represented just 23.9%, or 15,900, of the employed population 45 years and older, which stood at 66,600 in % Chart 13: Share of Employment by Age, Persons 45+ years, NL, 2000 and to 49 years 50 to 54 years 55 to 59 years 60 to 64 years 65 years and over 100.0% 80.0% 60.0% 2.4% 5.4% 16.1% 33.0% 7.9% 13.8% 22.2% 40.0% 27.8% 20.0% 43.1% 28.2% 0.0% Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) Collaborative Applied Research in Economics 9

10 Changing demographics are impacting labour market trends. Mixed youth employment outcomes largely associated with population trends. Employment among youth in Newfoundland and Labrador (15 to 24 year olds) increased by 7.3% between 2000 and This is slightly below the 8.7% growth observed for youth overall in Canada, and well below the 20% employment growth observed for the total population 15+ years in the province. In contrast, youth unemployment levels dropped by - 40% in the province since 2000 while growing by 16.6% in Canada. 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 - Chart 14: Share of Youth Population (15 to 24 years) by Labour Force Characteristic, NL, 2000 and 2014 Employed Unemployed Not in the Labour Force Population 77,100 40,500 58,300 23,400 9,300 5,600 27,300 29, Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) While employment gains were very modest, youth experience dramatic improvements with respect to participation, employment and unemployment rates. This is largely due to the significant decline in the total youth population (15 to 24 years old) between 2000 and 2014 of just over 24%. Chart 15: Participation Rate, Unemployment Rate and Employment Rate, Youth Population (15 to 24 years), NL, 2000 and 2014 Employment rate Participation rate Unemployment rate Percent Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) Collaborative Applied Research in Economics 10

11 Industries As shown in Table 1, most industries in Newfoundland and Labrador experienced growth over the 2000 to 2014 period except fishing, hunting, and trapping, forestry and logging with support activities, and manufacturing (non- durables). Overall, the goods- producing sector grew by 28.7% in this period, compared to 2.3% for Canada overall. The services- producing sector grew by 17.7%, almost 10 percentage points less than the rest of the country (27%). For the most part, the distribution of employment has remained fairly consistent since 2000 with health care and social assistance, retail trade, educational services, and public administration retaining their positions among the top five industries for employment within the province. However, the construction sector has grown to displace the accommodations and food services industry in the top five. Collectively, these five industries represented 53.9% of employment in the province in Similar to the provincial experience, health care and social assistance, retail trade, and educational services were among the top five industries in Canada in However, the other industries rounding out the top five for employment included professional, scientific, and technical services, and manufacturing (durables). Collectively, these industries accounted for 46.6% of total employment in Canada, pointing to a more diversified distribution of employment relative to the province. The industries that grew the fastest over the 2000 to 2014 in the province include: mining, quarrying, and oil and gas extraction (185.4%); construction (113.2%); utilities (62.5%); professional, scientific, and technical services (51.4%); business, building and other support services (33.3%); and health care and social assistance (33.0%). Those that exhibited the strongest growth in terms of absolute employment levels in this period include: construction (12,000); health care and social assistance (9,300); mining, quarrying, and oil and gas extraction (8,900); retail trade (3,700); and professional, scientific, and technical services (3,600). Collaborative Applied Research in Economics 11

12 Industries Newfoundland and Labrador Canada Employment by Industry Levels (000's) Share of Employment Change Levels (000's) Share of Employment # % # % Total Employment % 100% % % 100% % Goods- producing sector (15) % 22.9% % % 21.9% % Agriculture [ ] (17) % 0.5% % % 1.7% % Fishing, hunting and trapping [114];Forestry % 1.7% % % 0.4% % Mining, quarrying, and oil and gas extraction % 5.7% % % 1.7% % Utilities [22] % 1.1% % % 0.8% % Construction [23] % 9.5% % % 7.7% % Manufacturing Durables [ ] % 1.9% % % 5.8% % Manufacturing Non- durables [ % 2.6% % % 3.8% % Services- producing sector (16) % 77.1% % % 78.1% % Wholesale trade [41] % 2.6% % % 3.5% % Retail trade [44-45] % 14.0% % % 11.8% % Transportation and warehousing [48-49] % 4.9% % % 5.0% % Finance and insurance [52] % 2.6% % % 4.4% % Real estate and leasing [53] % 1.0% % % 1.7% % Professional, scientific and technical service % 4.4% % % 7.5% % Business, building and other support service % 2.7% % % 4.1% % Educational services [61] % 7.4% % % 6.9% % Health care and social assistance [62] % 15.7% % % 12.5% % Information, culture and recreation [51 71] % 3.1% % % 4.3% % Accommodation and food services [72] % 6.3% % % 6.8% % Other services [81] % 5.0% % % 4.5% % Public administration [91] % 7.3% % % 5.1% % Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) Change Collaborative Applied Research in Economics 12

13 Wages Newfoundland and Labrador has moved from second last to the top two for average weekly wages in the country. Newfoundland and Labrador outpaced the rest of the country in terms of wage growth over the 2000 to 2014 period as average weekly wages grew by 83.6%, from $ in 2000 to $ in 2014, second only to Alberta. Comparatively, average weekly wages grew by 46% for Canada, from $ in 2000 to $ in $1,200 Chart 16: Average Weekly Wages, Canada and the Provinces, 2000 and $1,000 $800 $600 $400 $200 $- $898 $966 $616 $526 $759 $812 $782 $474 $524 $534 $580 $814 $657 $907 $814 $950 $1,082 $552 $547 $617 $639 $882 Canada NL PEI NS NB QU ON MN SK AB BC Source: Statistics Canada. Table Labour force survey estimates (LFS), by sex and detailed age group, annual (persons unless otherwise noted) While average weekly wages have grown in every given industry in the province, those that showed above average growth rates between 2000 and 2014 include: Other services (90.6%); Accommodation and food services (93.7%); Professional, scientific and technical services (94.0%); Agriculture (104.7%); Construction (107.8%); and Business, building and other support services (115.3%). In 2014 the occupations with the highest average weekly wages in Newfoundland included: Management occupations ($ ); Professional occupations in health, nurse supervisors, and registered nurses ($ ); Occupations unique to primary industry ($ ); Teachers and professors ($ ); and Occupations in social sciences, education, government service, and religion ($ ). Collaborative Applied Research in Economics 13

14 Wages In contrast, occupations with the lowest average weekly wages included: Childcare and home support workers ($402.65); Retail salespersons, sales clerks, cashiers, including retail trade specialists, and retail, wholesale and grain buyers ($444.22); Chefs and cooks, and occupations in food and beverage service, including supervisors ($512.94); Sales and service occupations ($537.57); and Occupations in art, culture, recreation, and sport ($668.05). Chart 17: Average Weekly Wages by Industry, NL, 2000 and 2014 $1, $1, $1, $1, $1, $ $ $ $ $- $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $1, $ $1, $ $1, $ $1, $ $1, $ $1, $ $1, $ $1, $ $1, Source: Statistics Canada. Table Labour force survey estimates (LFS) Collaborative Applied Research in Economics 14

15 Wages Despite wage growth, wage gaps between men and women continue. Growth in average weekly wages among women in the province outpaced that of men over the 2000 and 2014 period, growing by 87% from $ in 2000 to $ in Comparatively, men s average weekly wages grew by 82% from $ to $ Chart 18: Average Weekly Wages by Gender, NL, 2000 and 2014 $1, $1, $1, $ $ $ $ $0.00 Females Males $1, $ $ $ Source: Statistics Canada. Table Labour force survey estimates (LFS) The higher wage growth among women has narrowed the wage gap slightly over the past 14 years, however the province still shows one of the largest gaps in the country. In 2000, men s average weekly wages were 55% higher than women s in the province; in 2014 the gap was 51%. Comparatively, the wage gap narrowed from 44% in Canada in 2000 to 33% by Wage differentials are also evident at the occupational level. As shown below, some of the more significant wage gaps are among those occupations dominated by women, such as sales and service occupations. Collaborative Applied Research in Economics 15

16 Wages Occupational Category Share of Employment 2014 Avg. Weekly Wages 2014 Both Sexes Female Male Both Sexes Female Management occupations [A] 7.0% 5.8% 8.1% $1, $1, $1, Business, finance and administrative occupations [B] 15.1% 22.4% 8.3% $ $ $1, Natural and applied sciences and related occupations [C] 8.1% 3.5% 12.5% $1, $1, $1, Health occupations [D] 8.3% 13.8% 2.9% $1, $1, $1, Occupations in social science, education, government service and religion [E] 8.8% 12.6% 5.2% $1, $1, $1, Occupations in art, culture, recreation and sport [F] 2.1% 2.8% 1.5% $ $ $ Sales and service occupations [G] (11) 26.9% 34.9% 19.3% $ $ $ Trades, transport and equipment operators and related occupations [H] 17.1% 1.5% 31.9% $1, $ $1, Occupations unique to primary industry [I] 4.2% 1.0% 7.3% $1, $ $1, Occupations unique to processing, manufacturing and utilities [J] 2.3% 1.4% 3.1% $ $ $1, Male Ratio of Avg. Weekly Wages Males to Females 2014 Collaborative Applied Research in Economics 16

17 Conclusion Reflecting on the past is vital for understanding the future. Review of historical data reveals economic trends, allows for an increased knowledge of how current economic conditions have been achieved. Analyzing these trends over time provides a heightened understanding of where we are and may be used as a predictor of where we are going. While the complexities of the global marketplace are difficult to forecast, discerning the present allows us to better prepare for the road ahead. Reviewing Newfoundland and Labrador s economic data over the past fifteen years is important to understanding the areas in which the labour market is strong, and areas in which it can grow. By identifying trends, we are better equipped to create policies that will allow our labour market to increase and improve. During the first fifteen years of this century, Newfoundland and Labrador s economy has prospered. After decades as a have not, the province s GDP per capita and average weekly wages are now the second highest in the country. Employment is hovering at an all- time high and unemployment rates have reached historic lows. Employment rates amongst the core age population (25-54) are increasing. Focusing in on the data, however, reveals major challenges and adjustments ahead both in the medium term and the longer term. 41.3% of the population is 50+ years old and outmigration is a consistent trend among youth. 30.2% of the employment growth since 2000 is attributed to the construction sector primarily related to the development of large resource- based projects. As these projects come into production the construction phase has ended and employment may decline without new activities being developed. Declines in employment in the construction occupations may be expected in the medium term at least for work within the Province. The long- term economic opportunities depend on resource availability and the price of the produced product. And while in the medium term, the employment levels may decline the demand for workers may increase as new entrants are required to replace those who retire or leave. The magnitude of our demographic bulge, centered on boomers, that is those aged from 51-68, is unique in Canada as is the decline in our fertility rate. We emphasize that replacement demand due to retirements and leavers coupled with declines in the number of new entrants could result in labour shortages in some occupations. Structural occupational mismatches are a real possibility. Newfoundland and Labrador s economy is in a much better position than it was at the start of this Century. There are emerging challenges both in the medium term and longer term. Looking ahead, the following points should be considered: As negative population growth persists, how can we attract and retain more people to the province? Given low participation rates in some demographics, how can we engage more people in the workforce? To ensure more stable economic growth, how can we diversify industries within the Province? Collaborative Applied Research in Economics 17

18 Collaborative Applied Research in Economics 18 NOTE: All opinions expressed in commentary those of the authors and do not represent those of Memorial University nor CARE.