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Manufacturing to blame for Ontario’s shrinking status as economic engine

It's been a rough decade for manufacturing, but things are looking up as the sector rebounds by 7.8% in 2012.


OTTAWA—Ontario’s status as the economic engine of the country has been in a steady decline for the better part of a decade—and most of the blame can be laid at the feet of the manufacturing sector—newly-released data suggests.

While the province’s opposition parties pointed to the Statistics Canada data as proof of poor economic stewardship under the governing Liberals, the economic development minister shot back with figures he says show manufacturing is on the rebound in the province.

StatsCan’s latest payroll employment report shows Ontario lost about two thirds of the 52,500 jobs shed in September.

But it is the agency’s 10-year perspective on the country’s most populous province that is most revealing of Ontario’s lagging performance.

It shows Ontario’s share of Canada’s employees has been slipping the past decade to 38% today, from 39.2% in 2003. As of September, there were 5.8 million payroll workers in Ontario.

All of the relative decline can be explained by what has happened in the factory sector.

Statistics Canada puts the manufacturing job losses in Ontario at 255,000 over the past decade, dropping the number of factory employees from 908,900 in January 2003 to 654,200 in September 2012.

Coincidentally, during an similar period, the province’s gross domestic product output has swooned even further in relation to the national total from 41.4% in 2002 to 37.1% last year.

In both output and jobs, Alberta and Saskatchewan have been the key beneficiaries.

Once the top employer in the province, manufacturing was surpassed by the retail sector in 2009, and now faces a challenge for second place from health-care and social assistance employees.

Economic Development Minister Brad Duguid said the manufacturing sector was on the rebound, up 7.8% for the first seven months of 2012.

“Manufacturing is coming back, and it’s being led in many ways by an auto sector that’s back to pre-recession levels for exports, close to pre-recession levels in production and is currently experiencing its highest vehicle sales in over a decade,” he said.

He added that Ontario has created 130% of the jobs it lost during the recession, but Shurman said most of that is because the government added 300,000 net new public sector jobs.

The numbers are not surprising, said economist Jimmy Jean of Desjardins Capital Markets, given the precipitous decline of Ontario’s manufacturing sector. But he blamed the strong dollar, which began rising in the early 2000s, first reaching parity in 2007, and global factors.

Jean said despite the criticism levelled at proponents of the so-called Dutch Disease phenomenon—that commodity-driven appreciation of the dollar undermines manufacturing—the data suggests the loonie’s strength is at least partially responsible for what is occurring in Ontario, and to some extent Quebec as well.

“There are many factors, including globalization (for manufacturing’s decline) … but when you look at those trends, it’s very hard to be fully convinced that Canada is not indeed suffering from the Dutch malaise,” he said. “In this context, you would expect that will play into lower income prospects and salaries.”

And the government numbers suggest that is happening. The agency’s September report notes that Ontario has experienced below average growth in earnings the past two years.

In the past 12 months, average weekly salaries in Ontario rose 2.4% to $908.59, but the increase is below the national average gain of 3.4%.

In terms of average weekly wages, Ontario is just above the national average of $902.29, but bested by Alberta, Saskatchewan, Newfoundland, the Yukon, Northwest Territories and Nunavut.

©The Canadian Press