May 24, 2012

February 27, 2012

2012 is shaping up to be a difficult year for labour

Alex Carrick

Chief Economist, CanaData

Canada’s industry-based gross domestic product (GDP) stalled in the latest two months for which data is available, October (0.0% month to month) and November (-0.1%).

The nation-wide employment gain in the second half of last year was only 26,000. In the first half, it had been 164,000. January 2012’s employment level stayed flat (+2,000).

In other words, the early indications are that this year is shaping up as a difficult one for labour.

Which are the best and worst urban centres for finding employment at this time? And what are some of the stand-out features to take note of on some city labour scenes?

Each month, CanaData compiles a ranking of the 33 largest (i.e., by population) urban labour markets in the country. The formula is relatively simple. Employment growth (from fastest to slowest) and unemployment rate (lowest to highest) are combined in a composite index.

Most of the cities at the top of the list have some connection to the current winners in the jobs sweepstakes – resources, high-tech or government. A strong local academic community with research ties to one or more of the forgoing is a big additional plus.

Cities with traditional manufacturing are now largely on the outs. The Canadian dollar has been near parity with the U.S. dollar for the last several years. This completely alters the competitive landscape versus ten years ago when the loonie was at 65 cents U.S.

The situation seems to become more strained when there is a large union presence. The currency and union effects are being particularly felt in Ontario, with St. Catharines-Niagara, London, Toronto, Brantford and Windsor all caught in the net.

In London, which is number 27 in the composite ranking, a major plant closing has caused a great deal of consternation. On Friday, February 3, Caterpillar Inc. announced that it would be ceasing operations at its Electro-Motive train engine plant .

The number of workers affected will be 500-plus. The action comes about a month after a lock-out. Caterpillar had been looking for massive wage concessions, on the order of 50%, plus alterations to the structure of the pension plan.

There is speculation the jobs will be moved to Indiana, which lies to the south of the company’s head office in Peoria Illinois. Indiana has just enacted “right to work” legislation, which says employees don’t have to join a union.

Caterpillar has reported record profits in this latest year , thanks largely to export sales success.

The workers in London, who are represented by the Canadian Auto Workers union (CAW), are threatening to occupy the plant until they’re offered adequate severance. This was a tactic that worked when Caterpillar shut down a plant in Brampton in 1991.

Toronto (28th) is another Ontario city appearing well down in the composite labour market ranking. The biggest news is currently being made at City Hall. Mayor Rob Ford has been determined to win concessions from the city’s unions this year.

The first set of negotiations has just wrapped up. CUPE local 416, representing outside workers, has agreed to a new set of rules. It felt it was backed into a corner. The city threatened to unilaterally impose conditions once the current contract expires.

There is a strong positive psychological aspect to this latest agreement. CUPE 416 includes the garbage workers who went on strike in the long hot summer of 2009, thereby making life quite miserable for a lot of irate citizens.

Limiting wages increases is seen as an important goal by those supposedly in charge. But it’s sometimes playing second fiddle to other objectives. Management wants to regain the upper hand in establishing work schedules and the right to make layoffs.

CUPE 416 had offered to hold the line on compensation if the rest of the provisions in its contract were left unchanged. It appears they’ve had to back off from this stance.

The hastily-worked out agreement must be ratified by the union and then accepted by city council. Furthermore, this is just the beginning of talks this year. There are upcoming negotiations with the inside workers and library staff.

The public sector everywhere is trying to rein in costs. Municipalities in the rest of the country are expected to take note of Toronto’s success.

Finally, there’s an international set of negotiations underway that is likely to have considerable impacts at some city levels. Canada is trying to become part of the Trans Pacific Partnership (TPP) discussions.

The current nine participants are the United States, Australia, New Zealand, Chile, Peru, Malaysia, Vietnam, Singapore and Brunei. Japan wants in as well.

Canada will be asked to make major concessions in several areas where there are strong vested interests. Two primary examples are our supply-management systems in agriculture and our restrictions on investments in the banking, telecommunications, airline and cultural sectors.

Alterations with respect to supply management would have impacts on some of the mid-sized centres in Quebec, which have important dairy and poultry operations.

As for the loosening of foreign investment prohibitions, it might mean significant changes in the ownership of key companies operating in our largest cities.

For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog.

Print | Comment