Did student demonstrations cause lasting damage to tourism?

Canadians seem to be optimistic about prospects

The

latest job numbers in both Canada and the U.S. bring us plenty of good news, with employment climbing at a brisk rate in both countries. Better still, the marked U.S. improvement after months of weakness holds out hope for continued Canadian economic growth. It suggests that this country’s exports to the U.S. might perk up from their feeble performance so far this year.

But along with the generally positive tone, there’s some bad news. Most important for Quebec: Last spring’s student protests, which worried people in the tourism industry, really do seem to have done serious harm.

The bottom has fallen out of employment in Quebec’s tourism industry, with the number of jobs plunging by 31,300, or 9.5 per cent, since the beginning of this year. How bad is that? Well, by comparison, tourism employment in the rest of Canada has gone up in this period by 8,100, or one per cent, which makes it hard to blame the strong Canadian dollar and more likely that the problem is specifically in this province.

“I wonder if these student demonstrations have done some lasting damage to Quebec’s tourism sector,” asks Douglas Porter, deputy chief economist at BMO Capital Markets. While it would take a lot of research to say with precision how much of this distress is linked to the demonstrations and how much might be from other causes, it’s hard to think of any other negative event of similar magnitude.

This is a big problem because tourism is a big busi- ness, accounting for more than a quarter-million Quebec jobs. One way to measure the destruction wrought by the sector’s meltdown is to calculate how much lower the province’s unemployment rate might be if tourism in Quebec had held up as well as in the rest of Canada.

Our starting point is eight per cent, Quebec’s unemployment rate in September. (This number had bumped up a few ticks from August because of a robust inflow in new jobseekers overwhelmed the 10,600 new jobs created during past month.)

Quebec unemployment could have been a lot lower if tourism had held up better. There would have been 35,900 more Quebec jobs in September if tourism employment had grown one per cent this year, as in the rest of Canada, instead of declining sharply. That gain would have pushed the province’s September unemployment down nearly a full percentage point, to just 7.1 per cent last month.

Montreal, with its heavy concentration of tourist events and attractions and an 8.3 per cent jobless rate last month, would have shared this improvement.

Across Canada, we produced an impressive 52,100 jobs last month. The only reason unemployment inched up one-tenth of a point to 7.4 per cent was a flood of 72,600 new job seekers.

Still, there were some encouraging details and some that are less so.

Less encouraging: Two- thirds of our job growth in September can be chalked up to self-employment, a category that, on average, provides skimpier pay and benefits. For that reason Emanuella Enenajor, an economist at CIBC World Markets, warns that average job quality in Canada actually dipped.

But on the plus side, the same surge of job-seekers that pushed unemployment up shows that Canadians are increasingly optimistic about their job prospects. People are more likely to look for work when they think they’ll find it.

And certainly the fundamentals of Canada’s job mar- ket remain good. If you look past the unemployment rate, there’s a more solid indicator of underlying economic health: the employment rate, which measures the percentage of adults who have a job, period.

Canada’s employment rate has stayed significantly higher than the U.S. one for years, reflecting our healthier recovery. Porter noted yesterday that it remains there. In September, 61.9 per cent of Canadians had jobs compared with 58.7 per cent in the U.S.

But even the weak U.S. employment rate has been getting better. Last month, it hit a two-year high, notes Paul Ashworth, chief U.S economist at Capital Economics. Ashworth is encouraged by the new U.S. job numbers, although he’s not ready to predict a sustained growth surge.

But Porter is more upbeat. He points to several U.S. indicators suggest growing economic momentum, from auto sales to manufacturing, and capped by yesterday’s big drop to 7.8 per cent unemployment from 8.1. His cautious conclusion: “There is a tantalizing hint that we may be seeing the U.S. at a turning point.”