The loonie and jobs are soaring together. For the first time in thirty years, the Canadian dollar is worth the same as the U.S. dollar, or even slightly more. Economists agree that this is related to the remarkable growth in job creation over the past few months—the unemployment rate is shattering all records (less than 6%) and 51,000 new jobs were created in September. In comparison, the U.S. saw barely twice as many jobs created in the same period, for a population almost ten times higher. But this virtuous cycle could turn out to be more vicious than it appears.
Difficult repercussions
A number of people are speaking up about the unexpected effects of this sudden increase in the value of the dollar on jobs. Export sectors are the first to be visibly shaken. The decrease in exports is hitting manufacturers hard, along with certain services, such as consulting firms, for example, which lose their competitiveness on the U.S. market.
“The rise in the Canadian dollar has been too strong and quick to allow the market to adapt,” explains Claude Balthazard, director of HR Excellence at HRPAO. Affected employers have two options to block the effects of price increases for their products: quickly increase their productivity or cut back on production. The bottom line is that employers must lower their costs by freezing salaries, scaling back their training and equipment budgets, stopping hiring and even letting employees go in the event of major difficulties. The manufacturing and resource processing sectors lost 3,000 jobs in September, mainly in Ontario and Quebec. More than 290,000 manufacturing jobs have disappeared since November 2002.
So although the total number of jobs created continues to increase, some sectors are becoming fragile and working conditions are getting worse despite the healthy Canadian economy. “Instability is gaining ground,” worries Erin Weir, economist for the Canadian Labour Congress. “Generally well-paid and stable manufacturing jobs are being replaced with low-wage service and retail sector jobs.“
A touch of optimism
The outlook is not completely grim, however, as the rising dollar could benefit sectors with labour shortages such as information technology, finance and engineering, for example. With parity, salaries now have an equal value on both sides of the border. This is a relief to employers seeking specialized talent, which will no longer have to outdo the U.S. to offer attractive compensation. Expatriated Canadians would be motivated to return home and the relative brain drain to the U.S. would thus tend to peter out.
Attracting our neighbours is something else again! As Claude Balthazard points out, barriers to the importing of talents continue to exist, in the form of immigration policies, recognition of professional certifications, etc. According to him, sectors that are having a hard time recruiting specialists, like information technology, rarely opt for cross-border recruiting, because of the many complications involved. They prefer to outsource to the U.S.—today much more affordable.
“The impacts of the rising dollar are still limited,” concludes Claude Balthazard, “but they could get worse if the dollar’s ascent continues.” The decrease in investment would damage the competitiveness of the Canadian companies in the long run. “If the Bank of Canada does not take corrective actions, thousands of other manufacturing jobs will disappear,” warns Erin Weir.