The release of December’s Labour Force Survey from Statistics Canada means annual job growth figures can now be tabulated for 2019. Based on the annual average over the 12 calendar months, B.C. registered well above average job growth in 2019. The average unemployment rate for the year was 4.7%, which is equivalent to 2018’s jobless rate.
Figure 1: B.C.'s job growth was well above average in 2019
The average annual figures, however, mask a significant deterioration in the provincial labour market. Looking at the monthly data (seasonally adjusted) shows employment peaked in July and has trended lower since. As the right graph in the figure below shows, in the second half of 2019, year-over-year job growth steadily slowed. By the end of the year, the growth in employment in December 2019 compared to December 2018 was a meagre 0.3%.
Figure 2: B.C. employment turns down
The above figure clearly shows the recent downturn in total employment as well as the slowing in year-over-year growth rates. What is also evident is a similar decline in job growth in mid-2018, which was followed by a sharp rebound. Looking to 2020, is there reason to think the current slowing won’t be followed by a similar resurgence in job creation?
While stronger job growth will return at some point, in the near-term employment will likely continue falling. Given recent trends and the steep deterioration in parts of the province’s key export sectors, the upturn in provincial job growth is likely to be slower to materialize and weaker than the 2018 experience.
There a number of reasons to believe the slowing is different this time.
Firstly, the setting and backdrop was very different in 2018. By mid-year labour scarcity and hiring challenges were the biggest factor curtailing job growth. In our Q2 2018 outlook we indicated our belief that labour shortages were the dominant reason job growth had slowed. At the time labour market conditions were tight. The full year of data subsequently showed that in 2018 (based on annual averages) the labour force grew by just 0.6% while total employment outpaced this increase with a 1.1% gain. But the seeds of labour scarcity were sown the previous year (2017) when employment growth (3.7%) also outpaced labour force growth (2.7%). Going into 2018, job growth had already outpaced the expansion of the pool of available workers by a full percentage point.
These job growth/labour force growth dynamics pushed the average annual unemployment rate down to just 4.7% in 2018, the lowest rate since 2008. Along with the falling unemployment rate, the number of job vacancies in the province climbed steadily throughout 2017 and 2018.
As a sidebar, the pattern in the monthly data are also different. The dashed trendline in the above figure suggests that perhaps the Labour Force Survey overestimated employment gains for a number of months, which was followed by a “payback” period when job gains may have been underestimated. The current downturn was not preceded by unusually strong job gains.
The setting and conditions are different
Labour market conditions are different today. In contrast to 2018, growth in the labour force has been relatively strong and remained well above employment growth over the past 12 months. As a result, labour market conditions are not as tight as they were. The unemployment rate has moved up a half percentage point from its late 2018 low point. The job vacancy rate also has declined over the past year, providing additional evidence that the demand for labour has shifted down.
Figure 3: Monthly data show rise in unemployment rate
Another important difference between the two periods is that employment losses are now evident in both the goods and services sectors. In 2018, employment in the goods sector slipped but was generally flat through the year. Services employment fell for a period, but then turned up. Amid a longer-term downward trend, the decline in employment in the goods sector accelerated in 2019. And the number of people working in the broad services sector has now been falling for six months.
Figure 4: Job losses in both the goods and services sectors now
Within the goods sector, employment losses in the province’s large land-based export industries are mounting. The number of people working in the forestry and logging sector fell just over 9% in 2019. And employment in the mining and oil and gas industry declined 7.4%. The total number of manufacturing jobs in the province fell 5%, weighed down by job losses in the sawmills and wood manufacturing industry and likely mineral smelting as well.
With many other current economic indicators also pointing lower, the shift in the provincial labour market is something policy makers should be paying close attention to. Employment will start to climb again at some point in the future, but given the shifting landscape and signs that there is a little more slack in the labour market, the province appears to be headed for a period of slower growth.