Jobs weakness points to need for new focus on business climate

With the release of Statistics Canada’s December Labour Force Survey, it is now possible to tabulate annual employment growth rates and other key labour market indicators.

Based on annual averages of the 12 monthly readings, B.C.’s job market performed well in 2019. Employment rose by a solid 2.6%, second only to Ontario among the provinces. The average unemployment rate stood at 4.7%, which is certainly low by historical standards. 

The healthy annual figures, however, mask a significant deterioration in the labour market that became evident over the course of the year.

Looking at monthly employment data shows steady job gains in the first half of 2019 followed by a string of job losses in the back half of the year. Most of the job growth recorded in the first six months of 2019 was erased in the third and fourth quarters. The number of people working in the province in December 2019 was essentially unchanged from 12 months earlier. That points to a marked softening in underlying labour market conditions.

B.C. has experienced other recent periods of weakening employment growth. In 2018, for example, job creation went through a steep, albeit temporary, downturn. This time around, we believe the sluggishness of the labour market in the second half of 2019 may presage further job losses in the months ahead. Back in 2018, the external economic backdrop was better and the provincial economy was healthier. At that time, the slowdown in employment growth was attributable more to labour shortages than to a downshifting in the demand for workers. In 2017 and 2018, job growth outpaced labour force growth, and B.C.’s job vacancy rate climbed to new highs.

Now, things have shifted. First, the external economic picture is less positive. The global economy has cooled, and the long U.S. expansion looks to be running out of steam. Second, employment in the province has trended lower as the pace of job creation has decelerated. In contrast to 2017-18, the growth of the labour force has been outpacing job growth. As a result, monthly reports show the provincial unemployment rate inching up throughout most of 2019, and the job vacancy rate shrinking.

An important negative indicator is that employment is trending down in both the goods and services sectors of the economy. In the goods sector – consisting of resource extraction, manufacturing, construction and utilities – employment generally held up in 2018. But in early 2019, job losses in the goods sector began to mount. Halfway through the year, employment in the B.C. services sector also turned down.  

The drop in employment in the goods sector merits a closer look. Employment in this part of the B.C. economy has been subdued for a few years, but job losses surged in 2019. Jobs are disappearing in the province’s major land-based industries, notably – but not exclusively – forestry. The number of people working in forestry and logging slid by almost 10% in 2019, while employment in mining and oil and gas dropped by more than 7%. At the same time, employment in the broad B.C. manufacturing sector fell by 5%. 

Job losses and waning competitiveness in B.C.’s resource-based industries are extending to other segments of the economy, as the primary extraction and related manufacturing sectors scale back both their own production and purchases of business inputs from a wide range of local suppliers. Policy-makers should be worried.

It’s no secret that there are concerns in the business community about escalating tax and regulatory costs across all levels of government. The BC NDP administration in Victoria has contributed to this situation via higher corporate, payroll, carbon and housing taxes, as well as other changes the government has made in a host of policy domains such as the minimum wage, the labour code, employment standards, WorkSafeBC, environmental assessment, climate policy, land use, the adoption of the United Nations Declaration on the Rights of Indigenous Peoples and public-sector procurement rules, among others.

We do not suggest the government’s actions in all of these areas were unnecessary or wrong-headed. But there is a risk that the consequences of the government’s unfolding activist agenda may start to affect the decisions of business owners and operators, including decisions around job creation and retention. The disappointing job growth numbers seen since mid-2019 are a signal that the province should be paying closer attention to the ingredients needed to ensure that B.C. has a competitive, productive and innovative economy. Stated differently, in 2020 the John Horgan government should resolve to put more focus on the economy and the business climate.

Jock Finlayson is the Business Council of British Columbia’s executive vice-president and chief policy officer; Ken Peacock is the council’s chief economist.