12/1/2017 Goods and services: Canada's other two-speed economy - Macleans.

ca

Goodsandservices:Canadasothertwospeedeconomy
macleans.ca /economy/economicanalysis/canadasothertwospeedeconomy/
JasonKirby 1/6/2017

CanadasbifurcatedrecoveryhasbeenarecurringthemesincetheendoftheGreatRecession.Itusedtoreferto
theregionaldivideingrowth.Energyproducingprovinceswereinitiallyinthefastlane,whileeveryoneelselagged.
Thenoilpricescrashedandtheregionstradedplaces.

Nowtwospeedeconomyiscomingtomeansomethingdifferent,asthelatestjobsfiguresfromFridayconfirm:a
boominservicesectorjobsversusongoingdeclinesingoodsproducingindustries.

WithservicesectorjobgrowthuptwopercentinDecemberfromayearago,itsthebiggestannualincreasesince
early2013.Thelargestannualgainswereintheculturalandrecreationalindustry(allthoseforeigntouristsflocking
tolowcostCanada,nodoubt),whilethebiggestmonthovermonthincreasewasinprofessionalandtechnical
services.

Butasthechartaboveshows,evenbeforethesurgeinservicejobsinDecember,thedividebetweenjobgrowthin
theservicesandgoodsindustrieswasstark.Thelatterhasbeenlaidlowbywidespreadlayoffsintheoilandgas
sector,andanearlycompleteabsenceofhiringinthemanufacturingsector,despiteallthebenefitsofthelow
loonie.

Andthetrendhasbeenbuilding.Overthepastfiveyears,allbutafractionofnewjobswerecreatedintheservice
sector,withhealthcareandsocialservicesotherwiseknownasthebusinessoftakingcareofoldpeoplebeing
thebiggestdriversofar.Whatgainstherehavebeeninthegoodsproducingsectoroftheeconomywere
overwhelmingconcentratedintheconstructionindustry.(Thanks,housingboom!)

InaspeechlastNovember,FromHewersofWoodtoHewersofCode,BankofCanadaGovernorStephenPoloz
praisedthesurgeinCanadasserviceproducingsectorforcreatingnewjobsandliftinggrowth:Sincetheonsetof
theglobalfinancialcrisis,growthinCanadasservicesectorhasbeenstrongeronaveragethaninthegoodssector.
MostoftheemploymentgrowthseeninCanadasincelate2014hasbeeninserviceindustriesthatpayabove
averagewages,helpingtosupportnationalincome.

AsPoloznoted,theriseofservicejobsispartofalong,multidecadeevolutionofCanadaseconomythatnowsees
eightoutof10Canadiansworkingintheservicesector.Youlloftenhearpeoplewaxnostalgicaboutreturningtoan
erawhenCanadaseconomywasbasedonpeopleactuallybuildingthings,butyouhavetogobacktothe1950sto
findatimewhenamajorityofCanadianswereemployedinproducingphysicalgoods.

Whatsmore,thejobmarketgapbetweenthegoodsandservicessectorsdoesntbreakdownalongthesame
regionallinesthathaveledtoimbalancesintheCanadianeconomyoverthelastdecadeorso.Inmanufacturing
heavyOntario,thegoodssectoraddedjust5,000newpositionslastyear,whileservicesadded76,000.
MeanwhileinAlberta,jobsinthegoodssectorfellby53,000,whiletheservicessectoradded34,000notenough
tomaketheprovinceanetjobcreator,butcertainlyprovingthatAlbertaseconomyismorediversifiedthanjustoil
andgasjobs.

Itstruethatthewagesofmanyofthenewservicejobsbeingcreateddontalwaysmatchthegoodssectorjobsthat
havebeenlost.Wholesaleandretailtradewasthethirdbiggestdriverofemploymentlastyear,yetthosearenot
highwagejobs,andcertainlydontcomeclosetoreplacinghighpayingpositionsintheoilandgassector.Onthe
otherhand,theaveragehourlywageinthehealthcareandsocialassistancesectorlastyearsbiggestjobswinner
washigherthaninmanufacturing.Notallassemblylineworkcomeswithabig,fatpaycheque.

Thislatestjobsreport,coupledwithCanadasfirsttradesurplusintwoyears,willcertainlymaketheBankof
Canadahappy,atleastforthetimebeing.Manytroublespotsremain,fromglobaltradeuncertaintyaroundBrexit
andtheTrumppresidency,toCanadaswobblyhousingmarketathome.

Thentheresthesimplequestionofwhethertheresalimittohowmuchaneconomycandependonservicejobs
alone.AsPolozaskedrhetoricallyinhisspeechinNovemberabouttheriseoftheserviceeconomy,Howfarcan
12/1/2017 Goods and services: Canada's other two-speed economy - Macleans.ca

thesetrendsgo?

Werewellonourwaytofindingout.