Comparing Manufacturing Employment Growth: Canada and the USA

According to the employment numbers just released, the United States is doing quite well with the preliminary Bureau of Labour Statistics numbers pointing to the addition of 252,000 jobs in December and an unemployment rate now at 5.6 percent. Meanwhile, Canada exhibited a much weaker performance with Statistics Canada reporting that Canada lost 4,300 jobs in December and had an unemployment rate of 6.6 percent.  What is also interesting in this differential performance is what is happening in manufacturing – both recently and with some reference to the past.

The accompanying figure presents the growth rates of manufacturing employment for Canada and the United States using data from Statistics Canada and the Bureau of Labour Statistics for the period 1991 to 2013 (See below for Data references).  This longer-term perspective is quite interesting.  Over the entire 1991 to 2013 period, total manufacturing employment in both countries shrank with the average annual growth rate being -0.7 percent on Canada and -1.5 percent in the United States.

America’s manufacturing decline predates the Canadian one.  The 1990s saw fairly robust growth in Canadian manufacturing employment while American manufacturing employment shrank.  Canadian manufacturing employment also starts to show declines after 2002 in particular.  Manufacturing employment is hit hard in both countries between 2005 and 2009.  What is interesting however is that starting in 2010, employment growth in US manufacturing has been superior to that of Canada.  Between 2010 and 2013, manufacturing employment in Canada declined at an annual average rate of -0.7 percent while that of the United States grew at 1.2 percent.  In 2013 alone, manufacturing employment in Canada fell over 2.0 percent while that of the United States rose by almost 1 percent. 

I guess my question is since 2009, why is American manufacturing adding jobs in a more sustained fashion while Canadian manufacturing has exhibited a weaker performance?  Is it due primarily to fluctuations in our dollar – given the importance of the American market to our manufacturing – or are there other important factors?

 

Data Sources:

Canada-Statistics Canada, v2523012 Canada; Total employed, all classes of workers; Manufacturing

United States-Bureau of Labour Statistics-December Total. Series IdCES3000000001           

Comments

[Antonio de Sousa]

From a recent Globe & Mail article:
""" If General Motors Co. decides to continue producing vehicles in Canada later this decade, it won’t be because of the recent drop in the value of the Canadian dollar.

“We don’t make major footprint decisions based on those types of [currency] fluctuations,” GM’s chief executive officer Mary Barra said Thursday."""

I tend to think currency fluctuations don't affect long term capital projects, the availability of a reliable supply of high quality inputs, stable political and taxation regime matters more.

[Neil]

"I tend to think currency fluctuations don't affect long term capital projects, the availability of a reliable supply of high quality inputs, stable political and taxation regime matters more."

Why not? Currency fluctuation affects prices, and prices are how investment decisions are made. Anyone running an international business has to take currency fluctuations into account, and both the current price of currency, and the expected future price have an impact. A lower current value of the currency lowers the cost of the initial investment. If the expected future value is higher, then of course that raises ongoing operating costs in the analysis, but a lower currency still reduces the overall cost of a project.

[Jan]

To add to the discussion above, I think another reason for somewhat robust growth in manufacturing employment in the U.S. and the lack of growth in Canada might be due to the geographic distribution of new manufacturing jobs south of the border. At least until 2013, it appears to me that the Southeast U.S., Texas and California have gained more jobs in manufacturing than the traditional manufacturing states that Canada has ties to, such as Ohio, Michigan, Illinois, Pennsylvania and New York. Michigan has performed the best out of the latter group, and that might be because of its transition into the "right-to-work" club.