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Ontario Hit With Loss Of Manufacturing Jobs

Tue, 09/04/2007 - 6:30am
Laura Bobak, CP
TORONTO (CP) — Job losses in manufacturing in Ontario — like the 1,200 cuts just announced at General Motors — have been painful, but economists say the impact has been softened by growth in other sectors as the economy diversifies.
 
Free trade and the loss of manufacturing jobs to the developing world, including emerging economic titans like China, have all been linked to a flat lining Ontario economy.
 
Meanwhile, the resource-rich western provinces have seen employment and economic growth rates spike up like the gush from an oil strike.
 
Alberta's growth rate, which reached seven percent, was so high it was not sustainable, economists say, and TD Bank said it expects Alberta's economy to expand by only 4 percent this year.
 
This still outpaces Ontario's economic growth, which is forecast to plateau this year at 2 percent, according to TD Bank.
 
The strong loonie, which has appreciated almost 50 percent against the U.S. dollar, has been a major blow to Ontario, which depends in part on exports to the U.S.
 
The spending power of many American consumers also has weakened as the value of their homes drop, leaving them with less cash to spend on Ontario products, including cars.
 
Ontario has felt the pain of the U.S. downturn more than other provinces: in 2005, GM slashed 3,900 jobs in Oshawa, and this year Chrysler cut 2,000 jobs in Ontario. Windsor also has been hurt by the cuts, which have flowed through to the auto parts sector and other spin-off businesses.
 
According to a July report from TD Bank, about 100,000 jobs have been lost from the manufacturing sector in the greater Toronto area alone since mid-2002, but the news isn't all bleak.
 
''This about-face in manufacturers' fortunes has weighed on the region's growth but, fortunately, not derailed it,'' said the report.
 
''One key counter balancing force has come from the housing market, where the boom extended into its second decade, spreading offsetting benefits throughout the economy.''
 
Ontario has had other challenges to overcome including a multi-billion deficit, the SARS outbreak and the 2003 blackout on the continent's northeast.
 
Benjamin Tal, a senior economist at the Canadian Imperial Bank of Commerce, said Ontario's economic health varies from city-to-city, and the province's current growth, although modest, now is led by Toronto, Ottawa and Kitchener.
 
Ottawa and Kitchener in particular been bolstered by growth in the high-tech sector, he noted, adding Kitchener has been attracting about one-third of all high-tech startups in the country.
 
''If you look at the unemployment rate in Ontario outside of manufacturing jobs, it's not bad,'' Tal said. ''Yes, Ontario is slowing down, but it's surprising on the upside.''
 
Meanwhile, Toronto has been supported by the surge in financial services, which also have fueled the local housing market, Tal said.
 
That financial heartbeat, which shifted from Montreal due to concerns about Quebec sovereignty, has helped Ontario's economy stay diverse while Quebec, which also has lost manufacturing jobs, has faltered.
 
And although the auto sector is flagging, it is by no means the only game in town. The Sarnia area is supported by the chemical and petroleum industry, while steel and other primary metal production continues in Hamilton, Sault Ste. Marie and Sudbury.
 
''The relative decline in manufacturing is a concern, but in our view you're going to get enough offset in other areas of the economy,'' Derek Burleton, associate vice president and senior economist at TD Economics, said in a recent interview.
 
''I do think there are elements that will continue to support the economy in central Canada despite those challenges,'' he said, noting there is growth in government spending on health and education, as well as expansion in the service sector.
 
While farming and resource extraction still employ many in central Canada, there has been significant growth in the service economy.
 
According to a 2004 Statistics Canada labor force survey, the service sector — using a broad definition, including categories of financial, educational, government and recreation — employed 74 percent of workers in Ontario, while the goods producing sector, consisting of agriculture and other primary industries, manufacturing, construction and utilities, employed 26 percent.
 
In Ontario, the expansion of the service sector is not just restricted to low-wage jobs but also encompasses higher-end professional categories.
 
Ontario is no different than other major industrialized economies around the globe, shifting from primary industries to basic manufacturing and then to services and high-tech manufacturing.
 
The greatest job growth in Ontario, according to government data posted on the ''Ontario Job Futures'' Web site — a joint effort of the Ontario and federal governments — will be in the professional and technical categories, which was forecast to grow about 24 percent between 2004 and 2009, not including teaching and health.
 
Manufacturing and processing was expected to grow less than 10 percent in the same period, with health care and management also above nine percent.
 
The rate of growth in basic sales and service jobs such as cashiers and security guards was pegged at 8.3 percent while growth in other more services requiring more skills was forecast at 8.2 percent, followed by skilled trades, sales, transportation equipment operation and maintenance, clerical and teaching.
 
Small business also has been thriving in Ontario, Tal said, a view echoed by Canada's national lobby group of independent companies.
 
In fact, one of their biggest challenges is recruiting employees, especially qualified workers.
 
A survey of 8,000 independent companies in Ontario showed that one in two are having trouble attracting staff, said Garth Whyte, executive vice president of the Canadian Federation of Independent Business, which represents more than 105,000 companies across Canada.
 
Whyte said the labor problem is widespread, encompassing construction, transportation, wholesale, retail, agriculture, manufacturing, hospitality and other services.
 
The staff shortage problem is even greater in Alberta, where 72 percent of businesses have the same problem, although Alberta's red hot economy is slowing down somewhat, dampened slightly by rising costs and a drop in the prices of natural gas, as is British Columbia.
 
In contrast, it may come as a surprise to some that Alberta's neighbor, Saskatchewan, is now seen as the fastest growing by economists.
 
TD's Burleton says Saskatchewan's economy is expected to grow this year by 4.6 percent, outpacing every other Canadian province.
 
Resource-rich Saskatchewan is home to the world's largest uranium miner, Cameco Corp., which mines the world's richest deposits of the fuel used for the surging nuclear power industry.
 
The price of wheat also is at record levels, Burleton said. Saskatchewan also has the globe's largest supply of potash, a plant nutrient used in fertilizer.
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