Trend unlikely to continue as global economy and Canadian real estate sector cools

TORONTO, July 12, 2012 /CNW/ - The Canadian economy saw solid job creation in the first half of 2012, with many of those jobs being in high-paying sectors, but a slowing global economy likely means a drop in both the number and quality of new jobs in the coming quarters, finds CIBC's latest Canadian Employment Quality Index.

"The good news is that the Canadian economy created 155,000 new jobs in the first six months of 2012," says Benjamin Tal, deputy chief economist and author of the CIBC index. "The even better news is that these jobs were of high quality. These trajectories, however, are unlikely to last. The slowing global economy will work not only to soften the pace of jobs creation in the coming quarters, but also decrease the quality of the jobs that are created."

The CIBC Employment Quality Index, which 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, rose by 1.2 per cent during the first half of 2012 and is now back to its pre-recession level.

The report notes that full-time employment rose by 1.1 per cent during the first half of the year — ten times faster than growth in part-time employment, while accounting for 97 per cent of all jobs created during that period.

"More importantly, the number of full-time paid employees in high-paying sectors such as petroleum and coal manufacturing, oil and gas extraction, heavy and civil engineering construction and transportation equipment manufacturing, rose by 1.6 per cent in the first six months of the year," notes Mr. Tal. "That is more than double the pace seen in low-paying sectors such as miscellaneous manufacturing, wood product manufacturing, textile product mills and electronics and appliance stores."

Another positive trend over the last six months was the growth of paid employees. The number of these workers rose 1 per cent during the first six months of the year vs. a growth rate of only 0.1 per cent among self-employed. On average, the self-employed earn less than 80 per cent of the income of paid employees.

By province, the most significant improvement was in British Columbia. Close to 90 per cent of jobs created in the province in the past six months were full-time. The sectoral composition of employment has also improved with strong gains in high-paying sectors such as utilities, manufacturing and finance.

Although Ontario lagged the nation in the pace of job creation in the first half of the year, the jobs that it managed to create were of relatively high quality. Strong advances in the utility and financial sectors played a role but key was the 4 per cent increase in manufacturing employment led by high-paying subsectors such as computer and electronics, electric equipment and mineral manufacturing.

While job creation in Québec outpaced all other provinces in the first half of the year, the overall quality of employment fell modestly during that period, slightly eroding the positive impact on income growth in the province.

"The high volatility of recent job market statistics can make any observer dizzy, but the consistent trend of improvement in our employment quality index over the past six months was a pleasant surprise," adds Mr. Tal. "Combined with the recent acceleration in average wage gains, this should lead to a relatively strong pace of income growth in the second quarter.

"As for the future, unfortunately the recent improvement in job quality will be short-lived. The slowing global economy means that export-oriented high-paying jobs will not be as plentiful while a moderating real estate market will soften job creation in the construction sector. Add to it the impact of public sector downsizing and you have a sure-fire recipe for a slowing trajectory of employment quality in the coming quarters."

The CIBC Canadian Employment Quality Index 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-20120712.pdf

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