LACK OF PRIVATE-SECTOR INVESTMENT HURTING QUEBEC’S JOB MARKET

It’s been a disappointing year for the job market in Quebec. Those waiting for the provincial employment machine to shift into high gear have waited in vain.

While it’s generating positive growth so far this year, the job market is still missing a significant contribution from the private sector.

The latest labour force survey released by Statistics Canada revealed that 11,100 new jobs were added in Quebec in September, pushing the unemployment rate down by 0.3 percentage points to 7.7 per cent.

Even so, Quebec’s jobless rate is 0.6 percentage points above the national average and it’s significantly higher than the 6.9 per cent rate that prevailed in this province before the Great Recession of 2008-09.

Also of concern is the continued poor performance of the Montreal area, where the jobless rate is 8.7 per cent, down from 8.9 per cent in the previous month but still the highest of any major city in the country.

Since the end of 2014, the Quebec economy has generated 45,200 net new jobs — a modest performance that remains below what we typically see in an economic recovery.

At this point in the economic cycle, Quebec should be getting a bigger kick from the weaker Canadian dollar, lower oil prices and a strengthening economy south of the border. For a variety of reasons, that’s not happening.

One explanation is that companies have been sitting on cash balances and delaying investment plans.

“It’s been over a year that we have said to our members that we are surprised by the absence of private investment,” said Michel Leblanc, president of the Board of Trade of Metropolitan Montreal.

Yves-Thomas Dorval, who heads the province’s largest employer group, the Conseil du patronat, chalks it up to the uncertain global economy.

“There is still a lot of worry about the global business environment. Demand is lower in some countries than forecasted.” That affects Quebec’s export sector, which accounts for about 27 per cent of its economy.

Dorval also says that his members don’t see a marked improvement in the investment climate here. The Conseil’s annual report card on Quebec’s prosperity gave the province an average grade of C on 21 different measures of productivity and prosperity.

Quebec is showing employment growth of just over one per cent a year, which is in line with the growth rate of the economy, he said. Beyond that, there’s not much reason to expect more.

Growth is coming from the service sector, where 13,800 jobs were added in September. Economists warn, however, that such a trend is not sustainable. Goods producing industries like manufacturing saw a decrease of 2,700 jobs in Quebec during the month.

Leblanc says he’d like to see a “massive” effort from the province and Ottawa to promote exports. “We can’t rely on domestic demand alone for growth.”

Another trend is the heavy reliance of the Quebec economy on public sector employment, a share that has continued to increase since the mid-1970s.

“Despite slower growth in program spending, the share of public-sector workers in Quebec’s labour force continues to grow,” said National Bank Financial chief economist Stéphane Marion in a recent note.

Through the third quarter of the year, the proportion was a record 27 per cent of total employment. That contrasts with Ontario, where the share is about 24 per cent.

It’s a substantial difference, translating to about 115,000 more public-sector workers in Quebec than in Ontario and 237,000 more when compared to Alberta, where the public sector share is 21 per cent.

While the ideal size of the state is a matter of debate and many people in this province seem to like big government, economists worry about the crowding-out effect on the private sector.

“There are some indications that Quebec may have gone too far,” Marion said. “Private sector employment is stalling and a significant gap in productivity growth has emerged” between Quebec and the rest of Canada.

It’s been over a year that we have said to our members that we are surprised by the absence of private investment. MICHEL LEBLANC, Board of Trade of Metropolitan Montreal president