The employment storm of ’09 is on its way
Economists expect 251,000 jobs will be lost this year. Will yours be one of them?
Written by Jason Kirby on Thursday, January 8, 2009
Every Thursday, Kim Kent’s bosses at Cooper Standard tack a list of names to the wall. Cooper is an auto parts plant in Stratford, Ont., that makes rubber door trim for the Detroit Three, and the printout dictates the work schedule for the week ahead. It’s simple, really, explains Kent. “If your name is on the list, then you’re working; if it’s not, you’re not.” On Dec. 11, hers wasn’t. And with that she became yet another victim of the job crunch sweeping the country.
This isn’t the first time the 41-year-old autoworker has faced the axe. Two decades ago she took a job at another auto parts maker, where her father had worked before her, only to see the company go bust during the recession of the early 1990s. As stressful as that time was, it was nothing compared to the anxiety she’s feeling now. “This is so much scarier,” says Kent, 41. “The first time I lost my job, there were lots of other plants in town. Nowadays, there’s nothing else. I don’t know what I’m going to do.”
Kent’s worries have been made worse by the sudden drop in the real estate market. Five years ago, when her job seemed secure, she took the plunge and bought her first house. Once her unemployment insurance cheques begin to roll in, Kent figures they’ll barely cover her mortgage payments, let alone food and other basic living expenses. “My car is sitting in the driveway with a flat tire, another cost I can’t afford to deal with now.” She regularly checks the local newspaper for other types of jobs. There was a “livestock trucking mechanic” position open the other day, but when you don’t know the first thing about engine repair, let alone cattle, what are you doing to do? “If I knew the layoffs were going to be very long term, I’d go back to school,” she says. “But even then I really don’t know what I would study. Where are the good jobs?”
It’s a question being asked far beyond the assembly lines of the automotive industry. After 15 phenomenal years of employment creation, Canada’s job machine is seizing up. Canadians got a startling glimpse of what may be in store last month, when Statistics Canada revealed employers shed a jaw-dropping 71,000 jobs in November, the worst monthly plunge in a quarter of a century. Since then, a steady flow of pink slips at Canadian companies suggests that figure is almost certain to rise.
Pick any region of the country and layoffs are becoming a sad fact of life. Detroit’s Big Three have already laid off thousands of workers in central Canada, and announced they’ll be shutting down many of their plants for a full month. On Bay Street hundreds of lawyers, investment bankers and analysts have been let go. Media companies across the country have slashed their newsrooms—most recently Quebecor axed 600 jobs at its Sun newspaper chain. In Quebec, a major T-shirt maker sent 400 packing. In Calgary, 400 carpenters building housing for oil sands workers are themselves out in the cold. And in Vancouver, industries as diverse as mining and video game development have slashed jobs and are closing up shop.
Add it all up, and economists believe unemployment is set to jump dramatically over the next two years, and no province or industry is immune. TD Economics estimates 251,000 jobs will be lost over the next nine months. The major bank economists are cautiously optimistic that the country won’t see a repeat of the downturns in the 1980s and 1990s, when the ranks of the unemployed swelled to around 12 per cent of the workforce; if they’re wrong, the scale of job losses would be far worse. During the 1990s Canada suffered two straight years of job losses totalling 356,000, warns James Marple, an economist with TD Bank. “Our forecast is that job losses won’t be that dire,” he says. “But the risk of job losses being worse than we anticipate is there.”
So the ultimate questions on most people’s minds are these: could one of those vanishing jobs be mine? Who’s safe and who’s at risk? What parts of the country will be hardest hit? And can I do anything to protect myself?
THE GOOD . . .
“If you can build a bridge or fix a road, that’s definitely a good thing,” says Dale Orr, an economist with IHS Global Insight in Toronto. Governments everywhere have vowed to build their way out of the recession by putting people to work on infrastructure projects. In the U.S., president-elect Barack Obama hopes to jolt the economy back to life with a $850-billion stimulus program, with much of that money earmarked for infrastructure. In Canada, Ottawa has already committed $6 billion in such spending, with promises of more to come. Metrolinx, the public transit authority serving the Greater Toronto Area, has said its $7-billion, five-year capital plan will create 17,000 jobs in the next two years as it builds light-rail transit lines. In B.C., the government is twinning the congested Port Mann bridge at a cost of $1.5 billion. Alberta has vowed to spend $20 billion over the next three years on capital projects, and Montreal’s crumbling overpasses desperately need replacing. To Orr, this adds up to increased demand for truck drivers, certain types of labourers and steelmakers.
Along the same lines, even though fears over climate change have taken a back seat to economic worries, governments are still intent on spending heavily to promote green energy projects. For instance, in Prince George, B.C., up to 150 jobs could be created from bio-energy projects that use wood-waste.
But infrastructure isn’t the only potential bright spot out there. Byrne Luft, vice-president of marketing at the staffing agency Manpower, sees growing demand in the information technology sector as companies look for ways to become more efficient. “Times like this are a catalyst to drive that sector,” he says. Likewise, amid the gloom on Bay Street, those who specialize in corporate restructuring could be in greater demand during this recession, as companies flex their penny-pinching ways. A. E. Feldman Associates, an executive search firm in New York, recently proclaimed accountants are “hot commodities in a slowing economy.” The firm noted that surveys of U.S.-certified public accounting firms found most have seen business jump 19 per cent over the last two years, a time when America’s economy was slowing down sharply.
The key, says Laurence Shatkin, the New Jersey-based author of 150 Best Recession-Proof Jobs, is to know what people need, no matter what shape the economy is in. A job with a utility is one example. “Every day people flush the toilet and the water has to be there,” he says. “These are the vital things people can’t do without.” Other similar jobs: doctors, nurses, teachers, court workers and law enforcement. (Vancouver, for instance, is on the hunt for 100 new police officers.) The fact that many of these jobs entail working for the government explains why public service employment is holding up better than in the private sector. Then again, the Harper government is now predicting a deficit of as much as $30 billion over the next four years. If the economy turns out to be worse than currently projected, that could mean a decline in government revenues. If that happens, even those relatively safe public sector jobs could be in jeopardy.
THE BAD . . .
The thing about recessions is that any weakness in an industry gets quickly exposed. This downturn is no different. The marketing, media and advertising industries, for instance, have taken a hit as publishers and producers struggle with dramatic technological shifts in the way people get their news and entertainment. As advertising budgets get slashed, media companies are bleeding jobs. Last month, Barclays Capital estimated that advertising spending in the U.S. for this year will fall 10 per cent to $252.1 billion.
Scribes and marketing types are one thing. Far more Canadians earn a paycheque in retailing, and the problems in that sector are also acute. Retailing has flourished in recent years, with big box stores springing up at lightning speed. Today the sector employs 1.8 million people, more than the manufacturing sector, which is a reversal from just three years ago. The problem, economists warn, is that much of the consumer spending that fuelled the retail boom was done with borrowed money. According to the Bank of Canada, the ratio of household debt to disposable income has reached 131 per cent, up from 110 per cent nine years ago. At the same time personal bankruptcies have begun to edge up. In the third quarter of last year, there were 22,776 personal bankruptcies filed, up nearly 17 per cent from the year before. As consumers struggle to cope with their mountains of debt, they’re cutting back at the till. In October, retail sales fell 0.9 per cent to $35.9 billion from the month before, with the sharpest declines hitting stores that sell home furnishings and electronics.
Even stalwart sectors like mining, oil and gas, which have driven Canada’s economy to new heights, are expected to suffer profoundly. Over the last decade employment in the oil and gas sector alone has grown nearly 49 per cent to 365,000 jobs. The problem is that commodity prices have reversed almost all of their gains of the last few years, putting many of those new jobs in peril. Don Drummond, chief economist with TD Bank, believes the price of a barrel of oil will settle around US$30, down nearly 80 per cent from its peak of just eight months ago. “The decline in commodity prices is the great equalizer,” he says. “I think Alberta will have a sizable output decline in 2009.”
It’s impossible to understate how important the boom in the West has been to Canada’s economic resilience. Until recently the phrase on most economists’ lips was “labour shortage.” In June, in a report on the B.C. mining industry, Don Lindsay, the CEO of mining giant Teck Cominco, fretted about the “pending labour shortage.” Six months later, his company has temporarily shut five of its mines to cut costs and plans to lay off 165 workers at a zinc mine in Washington state. And who can forget the tales from Fort McMurray of high-school dropouts pulling down $17 an hour at the local Tim Hortons while newcomers had their pick of six-figure jobs in the oil field? Last month ATCO Structures, a Calgary manufacturer of construction trailers, handed termination notices to 400 workers because of delays in oil sands projects. “For years I’ve heard nothing but chatter about how Canada faces these medium-term labour shortages,” says Doug Porter, an economist with BMO Nesbitt Burns. “I don’t think you’ll hear much about that for a while now. That concern will seem almost laughable over the next few years.”
In essence, the West has acted like a giant sponge, absorbing workers from across the country. For 20 straight quarters more people have moved away from Central Canada to other provinces than were coming in, with most of that movement flowing east to west. If the sponge is squeezed dry, Canada could find itself awash with desperate job seekers.
The same is true for the construction industry. The housing and condo boom of the last few years fuelled a hiring binge among carpenters, electricians and the like. As of November, construction accounted for 7.4 per cent of total employment—the highest it has been since the mid-1970s. In B.C. the figure peaked even higher, at 10 per cent. In fact, of the 87,000 jobs created in Canada between January and October of 2008, most of them were in the construction sector. “Construction was masking the weakness in employment,” says TD Bank’s Drummond. In other words, if it weren’t for the building boom, Ontario would have experienced a jobs crisis long ago—in that province the industry now employs three times as many people as the automotive and auto parts sectors.
But now the nail guns are falling silent. For the last five years builders have put up about 250,000 housing units a year, far more than the 180,000 warranted by Canada’s population growth. As of November, housing starts plunged to an annual rate of 172,000 as the financial crisis forced developers to delay or abandon some commercial and residential projects outright. Even with all the talk about infrastructure spending, economists say it won’t be enough to fully pick up the slack. “The construction sector is very vulnerable to a crash,” says Porter.
It’s become clear that many companies simply went overboard in their hiring. Economists have been warning that Canada’s productivity levels were plummeting, especially in the resource and construction sectors. “It was a bit of a mystery to me why Canadian employers were hiring so many people through October,” says Drummond. “It suggested to me that when things weakened, they’d be more inclined to do layoffs because they over-hired.” Now, it seems, that time has come.
. . . AND THE UGLY
On a Friday afternoon in mid-December, while the Bush administration was vowing to do everything it could to stop a “precipitous collapse” of the U.S. auto industry, four dozen Canadian automotive engineers gathered in a hotel in downtown Toronto to figure out what they would do if the unspeakable happens and one of the Detroit Three does indeed collapse. “We looked at our situation, with the auto industry going the way it is, and realized a lot of our folks need training to transition into other jobs,” says Phil Kling, chairman of the Society of Automotive Engineers in Ontario. “What are they going to do if the auto industry can’t support them any longer?”
The plight of the auto sector has dominated most of the discussion around central Canada’s worsening job market. And for good reason. Pummelled first by a rising loonie, and then by slumping car sales, the auto sector had already shed about 35,000 jobs since 2002. And the outlook remains grim. In its heyday, half of all cars and trucks sold in North America bore a GM brand name. Today it makes up just 20 per cent of the market. Even without a full collapse, analysts say, the Detroit automakers must keep cutting jobs. And that translates into even tougher times for parts suppliers like Magna International, which has failed to diversify away from the Detroit Three. In recent months the company shut several plants, letting go of hundreds of workers. The Conference Board of Canada says the auto parts industry shed 12,800 jobs in 2007, and predicts another 10,800 jobs will have been lost by the end of 2009.
Even the Japanese manufacturers Toyota and Honda, once hailed as bright spots in the auto sector, are starting to hurt. Just weeks after Toyota opened a new plant in Woodstock, Ont., in early December—a rare chance for politicians to cut ribbons—the company warned it would suffer its first annual operating loss. Analysts say it will be nearly impossible for Toyota to stick to its policy of zero layoffs if the recession deepens. The outlook is just as spotty for much of Central Canada’s manufacturing sector. Quebec’s low-skilled textile industry is likely to continue to suffer heavy job losses as work gets transferred overseas—even during the last five years of relatively good times, at least 3,000 textile jobs disappeared. Then last month Bombardier Recreational Products, the maker of Ski-Doo snowmobiles and Sea-Doos, terminated 1,000 jobs, the majority of them in Quebec. The outlook is better at Bombardier Inc.’s rail division, but for each sign of optimism, there’s another round of pink slips. Last month Babcock & Wilcox, a pipe maker in Cambridge, Ont., laid off 50 employees after a contract to supply one troubled oil sands project in Alberta was delayed. “The main message is that no province or industry is completely immune to the downturn of global growth,” says Porter.
Experts offer several tips to those who are worried about the security of their jobs, and they generally have to do with making yourself as indispensable as possible. For instance, Shatkin says workers need to make sure their higher-ups know what a good job they’re doing. (Others might call that sucking up to the boss.) With companies looking to cut costs, it’s also best not to be seen as being wasteful. And if you can, stick as close to your company’s core business as possible. During good times, businesses often bulk up by branching into other sectors. Those are often the first to go in a recession.
The problem is, many of the suggestions offered by career advisers don’t help much on a factory assembly line or in a labour-intensive job in the resource sector. But one thing all workers can think of doing is obtaining some extra skills. That could mean returning to school. Wayne Shillington, the president of NorQuest College in Edmonton, says his school typically sees a jump in enrolment during recessions as workers try to make themselves more employable. Of course, the best time to do that is before a recession actually hits, since it takes time to build up new skills. As Shatkin admits, “There are no easy answers for what you should do right now. In the short term, it’s tough.”
A lot depends on how deep, and how long the recession extends. In the 1980s, when a global slowdown hit all sectors of the economy, there were stories of Ph.D.s forced to pack groceries to make ends meet. During the 1990s recession, any manufacturer that said it was hiring would attract thousands of applicants who’d line up around the block just for a chance at an interview.
But even if the unemployment rate doesn’t reach into the double digits this time around, some economists worry the effect on the economy could be just as bad. That’s because the quality of jobs has been deteriorating for months now. “The unemployment rate is masking much more severe difficulties,” says Benjamin Tal, an economist with CIBC World Markets. “You have to look at not just the number of jobs being created, but also the quality of those jobs, and we’ve seen a significant decline over the last six months.” By that he means more and more workers are being forced to switch to part-time positions, or into “forced self-employment.” They earn a lower income, but don’t show up in the unemployment numbers. “You can make an argument that many of those self-employed people are actually unemployed, because they’re not making very much money.” And he expects job quality to continue to deteriorate for at least another six months.
Which means those hoping for a fast recovery are likely to be disappointed. With older workers delaying retirement, and hundreds of thousands of young workers and immigrants entering the labour force over the next two years, the days of multiple job offers and hardball salary negotiations are over.
For workers like 50-year-old Jaspal Brar, a line worker at Chrysler’s plant in Brampton, it’s a scary time. On Dec. 19 the company shut down all its plants in North America for one month. He doesn’t know what he’ll do if the layoffs at his plant become permanent. “The expectation and hope is that the company will survive and we’ll be able to get through this,” he says. But after a pause, he adds, “Sometimes it’s easier to just block the thought from your mind, because you don’t want to face reality.”
The reality is no one knows for certain how hard hit the Canadian job market will be during this recession. If the economists are right, the pain will be brief and the country will return to prosperity sometime later this year or early in 2010. But time and again during this crisis, early optimism about Canada’s resilience has proved misguided. So for those asking the question, “Is my job safe?” the answer will come soon enough. Fingers crossed, the news will be good.
http://blog.macleans.ca/2009/01/08/the-employment-storm-of-%e2%80%9909-is-on-its-way/
