Trend likely not sustainable as growth in construction and public sector jobs dries up

TORONTO, Nov. 4 /CNW/ - The quality of employment in Canada significantly improved in the first nine months of 2010, regaining all the ground lost during the recession, finds a new report from CIBC World Markets Inc.

In a year in which the economy added close to 330,000 new jobs, employment quality increased by almost four per cent despite the fact that part-time employment grew at a much faster rate than full-time positions. "The improvement in our measure of employment quality might surprise many observers given the fact that part-time employment has risen almost three times faster than full-time employment since the beginning of the year," says Benjamin Tal, deputy chief economist and author of CIBC's Employment Quality Index. "However, the full-time/part-time distribution is only a small part of a comprehensive measure of employment quality."

The report notes that while the significant increase in part-time employment had a negative impact on the index, the strong increase in paid employment relative to self-employment acted to offset this negative. The key driver of the jump in job quality came from the fact that the distribution of full-time paid jobs improved notably over the past nine months. During this time, the number of high-paying jobs rose four times faster than low-paying jobs and more than 90 per cent of the full time jobs created since early 2010 have been of the high-paying variety.

By province, the most significant improvement was in British Columbia which saw a 5.1 per cent increase in quality. That province also saw the biggest drop during the recession when quality fell by eight per cent. Alberta and Quebec saw strong improvement over the last nine months with increases of 2.6 and 2.4 per cent, respectively. However, not all provinces saw increases. Quality fell in Manitoba/Saskatchewan and Atlantic Canada.

While the overall improvement in employment quality is a positive economic sign, Mr. Tal does not think the trend is sustainable. He notes that the public sector accounted for no less than 10 per cent of all jobs created during the economic recovery. This contrasts to less than one per cent in previous recoveries.

He also adds that the construction industry, spurred in part by stimulus money, grew by 10 per cent during the recovery, single-handedly adding a quarter of all jobs since the rebound began. At this stage in previous economic recoveries, the construction sector had been a drag on job creation.

"Altogether, these two sectors have had a hand in spurring more than one-third of all jobs created in this recovery," adds Mr. Tal. "And those jobs are relatively high quality (higher paid). With fiscal tightening, and the housing market losing ground, the economy will be unable to replace that sizable contribution from public sector and construction jobs.

"It is unlikely that the new jobs created in 2011 would be of the same high quality-limiting the upside potential in personal income and helping to keep the Bank of Canada on the sidelines."

Percentage Change in EQI by Province
    (Q3-2009 vs. Q3-2010)

    Province                  % Change
    -----------------------------------
    BC                            5.1
    -----------------------------------
    Alberta                       2.6
    -----------------------------------
    Quebec                        2.4
    -----------------------------------
    Ontario                       0.5
    -----------------------------------
    Atlantic Canada              (1.4)
    -----------------------------------
    Man/Sask                     (1.9)
    -----------------------------------

    The CIBC Canadian Employment Quality Index (EQI), combines information
    on:
    -   the distribution of part-time vs. full-time jobs;
    -   self-employment vs. paid employment;
    -   and the compensation ranking of full-time paid employment jobs in
        more than 100 industry groups

The complete CIBC World Markets report is available at:

http://research.cibcwm.com/economic_public/download/eqi-cda-20101104.pdf.

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