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mast-head for "Perspectives on Labour and Income"
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January 2003     Vol. 4, no. 1

2002 - A good year in the labour market

Geoff Bowlby

For the labour market, 2002 was another year that defied expectations. Few had expected it to improve, but improve it did-dramatically.

In its original 2002 forecast, the Organisation for Economic Co-operation and Development (OECD) predicted employment growth of 1.3%, a forecast that was later revised to 1.6% (OECD 2001; OECD 2002). But the actual increase came in even higher-on an annual average basis, employment grew 2.2% in 2002. Comparing December with December (the focus in this article), the increase was even more pronounced.

Record employment rate

By the end of 2002, employment had jumped 560,000 (3.7%) from where it began the year (Chart A). In December, the proportion of the working-age population employed was 62.4%, the highest on record.

As a result, the unemployment rate fell half a point to 7.5%. Had it not been for a large jump in labour market participation, the rate would have dropped more (Chart B). At the end of the year, the participation rate hit 67.5%, up a full point for the year, tying the high of January 1990.

A strong economy was behind the well-rounded improvement in the labour market. Between the third quarter of 2001, when the economy was at its low point for that year, and the third quarter of 2002, gross domestic product increased 4.0%. Consumer and government spending maintained the strong pace of 2001 while business spending remained slow. In 2002, however, housing and exports picked up considerably.

Most industries hired, especially manufacturing

Firms in most industries were hiring in 2002, but the largest gain came in manufacturing, where the ranks of the employed jumped 125,000 (5.6%), a sharp contrast to the 112,000 (-4.8%) decline in 2001 (Table 1). Since factory employment is very sensitive to general economic conditions, manufacturing was the main source of both the weakness in 2001 and the strength in 2002 (Chart C).

Within manufacturing, the gains were widespread, but the largest increases for the year came in food manufacturing and machinery production.

Compared with December 2001, employment in food processing was up 23,000 (9.8%), with broadly based gains in the type of food production. The Survey of Employment, Payroll and Hours indicated the largest employment gains at plants producing dairy products, seafood, meat products, and bakery products. After motor vehicles and parts, food manufacturing was the second largest factory employer in 2002.

Machinery manufacturing employment expanded 19,000 (16.6%) in 2002. This industry, which largely supplies other manufacturers as well as the construction industry, enjoyed a rebound from 2001, when employment fell by 6.6% as industrial production in Canada and the United States declined significantly.

Although it ended the year on a negative note, the automotive sector helped drive the upward trend in manufacturing for much of 2002. During the January to October period, motor vehicle shipments in Canada were 7.6% higher than the same period a year earlier. Growth in U.S. automotive shipments was also very strong-up 9.9% in the first 10 months of the year. As a result, Canadian parts plants expanded output to feed the increased production at North American assembly plants, jumping 10.1% in the 10 months.

Early in the year, the added production had a notable effect on employment. By August, automotive and parts employment was over 15% higher than a year earlier. However, as sales softened in the United States in the last quarter of the year, automobile inventories began to increase, resulting in the need to slow or halt assembly at a number of plants.

In December, automotive layoffs increased markedly, as Ford temporarily closed its Oakville van plant and its facilities in St. Thomas, shutdowns expected to last into January. General Motors also began layoffs in December at its Ingersoll, Ontario, facility. Furthermore, DaimlerChrysler announced in December that it would close all three of its assembly operations for part of January, 2003. The temporary shutdown of these large facilities likely had a significant spin-off effect on employment at parts suppliers. In total, employment in motor vehicles and parts fell 21,000 in December alone, eliminating all the gains made earlier in the year.

Housing boom and manufacturing gains drove jobs for adult men

As mentioned, residential investment took off in 2002. According to Canada Mortgage and Housing Corporation, new housing starts in November were up a remarkable 27.0% from the same month in 2001 (Chart D). As a result, employment in construction jumped 62,000 or 7.4% during 2002. The housing boom also led to some significant spin-off employment in furniture manufacturing and retailing, building material retailing, real estate sales, and banking.

The gains in manufacturing and construction had a major effect on employment among adult men. In 2002, overall employment increased 211,000 (3.1%), with 47% of the increase occurring in manufacturing or construction. This drove the unemployment rate for adult men down 0.6 points to end the year at 6.7% (Table 2).

Adult women benefited from health and education spending

Employment for adult women jumped 244,000 (4.2%) in 2002. While 20% of the increase came from manufacturing, more significant gains were made in health care and social assistance, as well as in education. By the end of the year, the unemployment rate for adult women was 6.1%, down 0.3 points.

Non-defence government spending was up 2.8% between the third quarters of 2001 and 2002. The employment data suggest that much of that spending went to hire staff at hospitals, schools, and in the federal government, pushing the ranks of the public sector up 120,000 (4.2%) to a level not seen since 1993.

In a year that the Canadian Institute for Health Information forecast health care spending to be up 6.3% to $112.2 billion, employment in health care and social assistance increased 90,000 (5.7%), the largest increase since 1989. Since 1997, health care spending has risen 30%, compared with gains of only 6% in the 1992-1996 period. Employment in the industry, meanwhile, jumped 19% in the last five years, up considerably from the 5% increase from 1992 to 1996.

Strong gains were made in all areas of the health care and social assistance industry in 2002. Social assistance groups, hospitals, nursing homes and ambulatory care facilities all stepped up hiring. By the end of 2002, the number of female nurses had increased 21,000, a jump of almost 10%.

A considerable number of adult women were also hired as teachers (21,000 or 5.8%). In 2002, employment in education jumped 79,000 (8.2%), a significant change from the payroll cuts in 2000 and the flat trend in 2001. The largest increases came in Ontario and Quebec, where education spending was expected to rise by 2.3% and 5.7% respectively in 2002-2003.

Employment in public administration was essentially unchanged in 2002 (-0.8%), but only because large gains at the federal level were offset by losses in local government. Between December 2001 and December 2002, federal government employment increased 19,000 (7.0%), while local government employment fell by a similar amount. Adult women enjoyed the lion's share of the increase in federal government employment (17,000). Together, health care, manufacturing, education, and public administration accounted for 52% of the employment gain for adult women.

More part-time jobs for youth

The general improvement in the labour market extended to youths in 2002. Youth employment increased 104,000 (4.5%) between December 2001 and December 2002. While retail and wholesale trade employment was little changed for the year, a large increase in youth employment in the industry was offset by losses among adults. Youth employment in restaurants and bars also expanded in 2002. At the end of the year, their unemployment rate was 13.3%, down 0.7 percentage points.

Youth employment expanded in 2002, in part because of the greater availability of part-time jobs (Chart E).

Overall, part-time work increased by a considerable 223,000 (8.1%), with a third of that gain coming in retail and wholesale trade, or accommodation and food. A smaller but still notable proportion of the part-time increase came from the education and health care sector.

Part-time employment growth was strong, but the increase in full-time was healthy as well. All of the increase in manufacturing and construction employment came in the form of full-time work, helping push full-time up 336,000 or 2.7%. The year before, in 2001, full-time employment fell 26,000 (-0.2%). note 1 

Hours worked up, productivity too

After scaling back on hours during the previous year, employers were more likely to hand out overtime cheques in 2002. In December 2002, 2.9 million employees were working overtime, an increase of over half a million from the same month a year earlier. This, combined with the strong employment growth, helped drive the total number of hours worked in Canada to 523 million in December, an increase of 3.3% over December 2001.

While employers were hiring and making greater use of overtime, private-sector employees were also more productive. From the third quarter of 2001 to the third quarter of 2002, labour productivity increased 2.6%, comparable with the above-average annual growth rates recorded in 1999 and 2000. Although median hourly wages rose 2.4% in 2002, increased productivity meant that the cost per worker for employers-unit labour costs-was essentially unchanged for the year.

Flat labour costs undoubtedly helped the bottom line for corporations in Canada, whose profits were up sharply in 2002. Profits jumped 9.2% in the first quarter, followed by a surge of 13.0% in the second quarter, and a modest 2.6% in the third.

Productivity gains in Canada were positive, but not as large as the changes in the United States. Economic growth in the U.S. was 3.2% between the third quarters of 2001 and 2002, but employment growth was anemic. As a result, output per hour worked in the U.S. shot up 5.6%, much greater than the gain in Canada.

Canadian labour market in better shape

The greater U.S. labour productivity gain was perhaps the only negative point of comparison between the Canadian and American labour markets. As employment rose in Canada throughout the year while eking out only weak gains in the United States, the persistent gaps in employment and participation rates disappeared. By November, a greater proportion of Canadians than Americans were employed (Chart F). The Canadian unemployment rate was higher than that in the U.S. throughout 2002, but only because Canadians were more likely than Americans to be looking for work. note 2 

Employment gains widespread

Employment increased in almost every province in 2002, but almost two-thirds of the gains were in Ontario or Quebec (slightly greater than their share of the population). In the first half of the year, the story was in Quebec, where employment increased by 128,000 or 3.7% from January to June. In the next six months, the national trend was driven by Ontario and its 129,000 (2.1%) new jobs.

At the end of the year, employment was up significantly in both provinces. In Ontario, the year saw gains of 3.3% (196,000), a contrast to 2001 when the increase was only 0.2%. Even though employment in Ontario was sharply improved in 2002, the unemployment rate ended the year at 7.0%, up slightly from where it began in January.

In Quebec, employment ended the year up 168,000 (4.8%), capping its best year on record. The strong employment gains pushed the unemployment rate to 8.4%, down from 9.7% at the start of the year. In December, the proportion of the population in Quebec that was employed, 60.3%, was the highest since at least 1976. note 3 

Almost two-thirds of the employment gain in Quebec occurred in Montréal, where employment jumped 108,000 (6.4%). This caused the unemployment rate in the city to drop 1.4 points to 8.4% and the employment rate to leap 3 points to 63.0%.

Although employment in Montréal increased by more than it did in Toronto, the labour market in Toronto in 2002 was still very strong. However, while employment in Canada's largest city increased 75,000 (2.9%) in 2002, the unemployment rate stayed at 7.0%. Since Toronto's employment growth was slightly larger than its robust population growth, the employment rate increased marginally (0.1 points) to hit 65.1% at the end of the year.

Both Ontario and Quebec had employment gains in the same four industries: manufacturing, construction, education, and health care and social assistance. With manufacturing shipments up 5.1% in Quebec and 10.9% in Ontario, factory employment in each province expanded by over 5%. Housing starts were up strongly in both provinces, but especially in Quebec where they were 55% higher in November than a year earlier. The added construction activity meant an extra 20,000 (14.2%) construction workers were employed in Quebec by the end of 2002, with another 23,000 (6.6%) added in Ontario.

Employment growth was also strong in British Columbia (81,000 or 4.2%) between December 2001 and December 2002. The unemployment rate for British Columbia was 8.3% at the end of 2002, down 1.4 points for the year. Since the increase in 2002 was a rebound from the large declines of the previous year, by December, employment in the province was only slightly higher (20,000 or 1.0%) than two years earlier.

Like many other provinces, British Columbia gained from the construction boom and the resurgence in manufacturing. In November, housing starts were up 51% from the same month a year earlier, leading to job gains of 16,000 (15.3%) in construction. As well, factory employment increased by 22,000 (12.1%) as manufacturers in the province increased output 8.6% between October 2001 and the same month in 2002. The increase in construction and manufacturing activity may have had spin-off effects on employment in two related areas: finance, insurance and real estate (20,000 or 18.7%); and transportation (15,000 or 15.1%).

Almost all of the increase in jobs in British Columbia was in the lower mainland area. Within that region, Vancouver had an additional 63,000 employed people at year-end, an increase of 6.1%, enough to push the unemployment rate in that city to 7.8% in December (-1.3 points). In contrast, employment in Victoria, where civil service cuts were felt in 2002, fell 1.5%, causing the unemployment rate to rise 0.7 points to 6.8% by December.

Labour market conditions in Alberta continued their long-term improvement in 2002. Employment increased 63,000 (3.9%). Because of added labour market participation, the unemployment rate in the province, at 5.1%, was unchanged for the year. Over half of the gains over 2002 were in the Edmonton area.

The share of working age Albertans who were employed at year-end was 69.8%, far higher than in any other province. In fact, the employment rate in Alberta ranked very high among all North American jurisdictions. In November, only Minnesota, Nebraska, Wisconsin, Iowa, and South Dakota in the United States had higher employment rates than Alberta.

Although oil and gas employment in Alberta increased sharply in the last quarter of 2002, it ended the year down 16,000 (-14.4%). A lag normally occurs between changes in oil prices and oil patch employment; the job gains late in the year were in response to the upward trend in oil prices that began at the start of the year. Gains in agriculture, manufacturing and construction were more than enough to offset the losses in oil and gas, leaving the broader goods-producing sector in the province up 3.7% (17,000). The services sector in Alberta expanded at a similar rate (3.9%).

Employment in Saskatchewan rebounded significantly from the declines in 2001. In that province, employment jumped 26,000 or 5.5%, the fastest rate of growth of any province. While the labour market in Saskatoon improved considerably in 2002, it failed to do so in Regina. In Saskatoon, the unemployment rate fell half a point to 6.4% in December, and the employment rate hit 67.0% at year-end, a jump of 3.9 points. In Regina, the unemployment rate was essentially unchanged at 5.4% but the employment rate slipped 0.2 points to 68.4%.

The only other province where employment grew faster than the rate of growth for the nation as a whole was New Brunswick. In that province, an additional 13,000 (3.9%) people were employed by December, dropping the unemployment rate 1.2 points to 10.2% and pushing the employment rate to 57.5% (1.9 points).

Notes

  1. See a forthcoming Perspectives article by M. Tabi and S. Langlois for more detail on the quality of job growth in 2002.
  2. For more information, see "The labour market: Up north, down south" by G. Bowlby and J. Usalcas in the December 2002 online edition of Perspectives.
  3. The Labour Force Survey began in 1946 but has changed the way it measures employment and unemployment. The current data are compatible only with those collected since 1976.

Author

Geoff Bowlby is with the Labour Statistics Division. He can be reached at (613) 951-3325 or perspectives@statcan.gc.ca.


Labour force status of Canadas working-age population.
Figure
In 2002, the employment rate for older workers increased the most.
Chart
The unemployment rate increased for all age groups in 2002.
Chart
In percentage terms, employment growth outpaced population growth for all age groups in 2002.
Table
Rising labour force participation slowed decreases in unemployment rates.
Table
Employment rates in 2002 more than recovered from 2001.
Chart
The rise in overall employment in 2002 split between full-time and part-time.
Chart
Self-employment increased strongly in 2002.
Chart
Over the last four years, employment growth has been strongest in construction, and management, administrative and other support industries.
Chart
Employment increases were seen in the majority of industries in 2002.
Chart Table
Since 1998, natural and applied science occupations increased the most in percentage terms. This group includes computer programmers, systems analysts and computer engineers.
Chart
Trades, transport and equipment operators, increased the most. Business, finance and administrative occupations saw almost no increase.
Chart Table
Employment in Calgary has increased more than in any other city over the last four years.
Chart
In percentage terms, job growth was strongest in Newfoundland and Labrador in 2002.
Chart
Ontario and Quebec had the greatest number of newly employed people in 2002, but only Quebec saw a decrease in the number of unemployed.
Table
Unemployment rates increased in most provinces in 2002.
Chart
In Canadas six largest cities, the average level of employment increased most in Montréal and Edmonton.
Chart Table
Workers in primary industries and occupations worked the longest hours in 2002.
Table
While overtime workers in the goods sector tended to be paid for their extra hours, most workers in the service sector were not paid for any extra hours.
Table
In 2002, the percentage of workers who involuntarily worked part time increased slightly, but decreased for people who worked 'short' hours because they were going to school.
Chart Table
Female employees earned 82 cents for every dollar earned by men in 2002, virtually unchanged from the year before.
Table
By industry, employees in utilities made the most. Among all the major occupation groups, managers remained the best paid.
Table
The largest drop in the ratio of unionized employees to all employees was in utilities.
Table
Over the 1990s, the number of "moonlighters" increased; however, their share of total employment remained around 5%.
Chart
About 13% of all employees worked on a temporary basis. For youths, the proportion was more than twice as high.
Chart
In 2002 and 2002, employment grew in Canada but fell in the United States.
Chart
The gap between the harmonized unemployment rates narrowed considerably in 2002.
Chart
Supplementary measures of unemployment and percentage-point change from 1998 to 2002.
Table

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