Economic growth will strengthen in most provinces in 2002, but job markets are expected to remain stagnant for much of the year, says the TD Provincial Economic Outlook.
“Just as employment trends are lagging the downturn in economic activity this year, we believe that the improvement in job markets will trail the upturn,” says Derek Burleton, senior economist at TD Bank Financial Group.
Burleton notes that evidence has been building in favour of the view that the worst may be yet to come on the provincial job fronts:
* Canadian businesses have been ‘hoarding’ labour this year – retaining underutilized workers with the hopes that economic conditions will pick up soon.
* Into the autumn of 2001, many companies had opted to pare back employee hours rather than lay off workers.
* As the provincial economies worsened, particularly after Sept. 11, corporate Canada began to replace full-time employees with part-timers.
* With profits still under extreme stress, and with no clear-cut signs of recovery, firms will be forced to trim staff outright in order to control costs.
“Though we do not expect unemployment rates to approach the double-digit levels reached during the 1990-91 recession,” Burleton says, “it will probably not be until the second half of next year that we see provincial job machines begin to rev up again, even though news on the economic front starts to improve in the first or second quarters of 2002.”
As a result, the pace of job creation in the provinces is projected to be close to nil.
The major implication of the sour near-term outlook for jobs is that the recent improving trend in household living standards, defined as changes in real personal disposable income (PDI) per capita, is likely to come to a halt next year.
Burleton notes that since 1997, real PDI per capita has been accelerating broadly across the provinces, supported by rising employment and personal tax cuts.
“But with dismal prospects for job creation for 2002, few additional cuts to personal tax rates in the pipeline, and a sizable hike in CPP premiums on tap for Jan. 1, household living standards will likely decline in most provinces next year.”
TD Economics expects the largest drop to be recorded in Ontario, while Newfoundland and Labrador, Saskatchewan and Manitoba will see increases in living standards.
The TD Outlook notes likely cooling off in oilpatch activity will put a temporary damper on real GDP growth in Alberta’s economy in 2002. Some improvement in crude oil and natural gas prices, as well as U.S. demand for the province’s exports, in the second half of next year will set the stage for a return to rapid growth in 2003.
Ramped-up crude oil production at both the Terra Nova and Hibernia offshore oilfields means economic growth in Newfoundland and Labrador will surge to a rate almost five times the national average next year.
