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Labour Market Insights: Employment for the holiday season and Ontario’s labour market trends for November 2021

Commentary

In-demand occupations and top-hiring companies certainly reflect the demands of everyday life, and right now we can see a few trends emerging as we approach the holidays. With warnings of supply chain issues, and perhaps an eagerness to make up for last year’s lost holiday season, retail saw an increase in hiring in October. Did it stay that way in November? Are there other issues at play? This month we’re taking a look at how the nuances of the 2021 holiday shopping season have impacted hiring. The analysis draws from Workforce WindsorEssex’s unique data source which covers job postings from across the province (excluding the City of Toronto and the far north-eastern region).

The 10 most in-demand occupations in November 2021 compared to the previous month were as follows:

Graphic credit: Janice Nelson

The top-10 in-demand occupations constitute just under one-third of all job postings (57,701 job postings or 31.2 percent) in the regions. The number of active job postings decreased by 2,573 in November relative to October for a total of 182,267, compared to 184,840 active job postings in October. This is a decrease of 1.4 percent across the regions for November.

We did see a decrease in hiring in some of the top-10 in-demand occupations from October to November. Most notable is the 28.9 percent decrease in hiring for Material Handlers, from 15,330 total active job posts in October to 10,893 in November. Retail Salespersons job postings are also down 5.2 percent from 12,608 total active job postings in October to 11,955 in November. Both of these figures are, however, closer to what they were in September (11,935 total active job postings for Material Handlers and 11,690 total active job postings for Retail Salespersons).

The increase in job postings for Material Handlers and Retail Salespersons in October is connected to retailers preparing for their Black Friday sales in November. This kicked off an earlier holiday shopping season, with many shoppers eager to make up for the lost holiday season of 2020 due to the pandemic. In fact, the Retail Council of Canada noted that Ontarians estimated they will spend $863 during the 2021 holiday season versus the national average of $792 as part of their 4th Annual Holiday Shopping Survey.

On the other hand, demand for Transport Truck Drivers increased 2.6 percent in November from October. Transport Truck Drivers are employed in the Transportation and Warehousing sector by businesses in transportation, manufacturing, distribution and moving companies, or they may be self-employed. To accommodate a busier shopping season, many companies, especially those on the top-10 hiring companies list below, would need additional employees at this time of year. In fact, looking at Statistics Canada’s employment by industry for the whole of Ontario, there were 382,500 employed in the Transportation and Warehousing sector in November, up 1.5 percent from 377,000 employed in the sector in October. This is also up 10.4 percent from 346,400 employed in November 2020, but not quite at pre-pandemic levels (down 3.7 percent from 397,100 jobs in November 2019, as a reference).

The top-10 companies hiring were as follows:

Graphic credit: Janice Nelson

While the companies on the top-10 list remained the same (with some changes in the top-10 spots), most decreased their hiring. Companies typically hire in advance of the holiday season so their recruitment process, hiring, and onboarding and training would be completed before they get extremely busy. As well, we are seeing well-publicized supply chain issues this year, sparking a sense of urgency in shoppers. With employers beginning their hiring process in October so the workforce can be in place before November, it was anticipatable that job postings would start to reduce. 

The Home Depot Canada tops the hiring companies chart with 2,635 total active job postings, up 21 percent from 2,083 in October. The Home Depot Canada carries many seasonal items and as well, many people may be looking to continue home improvements and other projects at home as the pandemic continues.

Also notable is the 16.7 percent increase in McDonald’s Restaurants’ hiring. This could be in preparation for increased business due to the holidays and already having the infrastructure in place to accommodate food orders quickly for drive-thru, take-out, and delivery options in the event additional public health measures are put back into place to address rising COVID-19 cases, as well as to cover vacation for some of their regular year-round employees. In addition to this, McDonald’s Restaurants is likely experiences a high turnover rate.

Looking ahead to December, we may see reduced job postings across Ontario as the holiday shopping season will have concluded and employers would not typically begin the recruitment process for any open positions in December, especially employers who either close or reduce capacity between the Christmas and New Years period.

For more information about Workforce WindsorEssex and their valuable LMI, please visit workforcewindsoressex.com.

Opinion: Canada already has big companies—it needs young, dynamic ones too

Commentary

Progress entails, as we have seen, destruction of capital values in the strata with which the new commodity or method of production competes. In perfect competition the old investments must be adapted at a sacrifice or abandoned; but when there is no perfect competition and when each industrial field is controlled by a few big concerns, these can in various ways fight the threatening attack on their capital structure and try to avoid losses on their capital accounts; that is to say, they can and will fight progress itself.

– Joseph A. Schumpeter, Capitalism, Socialism and Democracy


A recent Hub Dialogue between Robert Atkinson and Sean Speer championed the imperative of scale in Canada’s private sector. This discussion, however, considered issues of enterprise scale out of context. It’s true that large companies have many scale advantages for themselves, their shareholders, and their employees. But Canada’s biggest businesses have, at best, found no way to contribute to arresting the country’s declining economic dynamism. At worst, their dominance may contribute to its ongoing fall.

When you dig a bit deeper into the data, the glamour of bigness wears away quickly. A recent NBER working paper, “Some Facts on Dominant Firms,” outlines how the social and economic returns to scale and dominance have been shrinking for some time. Top firms contributed meaningfully to productivity growth in the postwar period, but, since 2000, they have not become larger or more productive, and their contributions to aggregate productivity growth have decreased dramatically.

Source: Some facts about dominant firms, Gutiérrez & Philippon, NBER. Graphic credit: Janice Nelson.

Returns to scale are particularly high for companies in high-tech and intangible sectors. These sectors, which have been responsible for remarkable broad-based gains in productivity over the past several decades, have also led equity markets in growth for a long time. Regrettably, Canada has among the smallest representation in these sectors among advanced economies—below global equity market averages and well below comparator nations.

Graphic credit: Janice Nelson.

And it may not just be which sectors dominate Canada’s economy but how concentrated they are. A 2019 SSRN paper “Are Industries Becoming More Concentrated? The Canadian Perspective,” finds that Canadian firms have also exhibited signs of consolidation.

Graphic credit: Janice Nelson.

If there is a problem with big business in Canada, it’s not that big business is “too big.” After all, in most countries, large companies are disproportionately responsible for spending on research and development, and Canada is an advanced economy with plenty of large companies. So what are Canadians to make of a continuing two-decade decline in business and enterprise R&D spending (now among the lowest in the OECD), while every comparator country has seen meaningful increases over the same period?

One answer might be to examine the composition of the top of Canada’s equity markets, which are dominated by old financial firms and resource companies. 

Graphic credit: Janice Nelson.

For emphasis: the median age of Canada’s fifteen largest public companies is 122 years. Canada’s Fathers of Confederation might have been shareholders in many of today’s largest Canadian companies. Many of the largest U.S. public companies, in contrast, are younger than their average shareholder.

Is dynamism important? Of course it is. What should Canada make of a 2021 Toronto Stock Exchange that would be largely recognizable to a Bay Street broker from 1921? 

We should, of course, want companies to reach scales that benefit consumers, investors, and Canadians in general. Yet those returns to scale are not just hard to find in R&D spending but in market metrics as well.

Consider the return on $100 invested in equities in 1980: if you chose an index of Canada’s largest public companies (the TSX 60), at the end of 2021 you’d have just over $1000. Not bad, certainly, but disappointing compared to the $2700 you’d have earned if you’d invested that same $100 in the mix of small and mid-cap U.S. companies that comprise the Russell 2000 index. And your returns are embarrassing compared with the $4200 returned by the S&P index of the 500 largest U.S. companies. 

The 500 largest U.S. companies meaningfully outperform the next 2000 small and mid-caps, so there are obvious returns to scale. This raises an important question: why aren’t there equivalent returns to scale in Canadians’ retirement portfolios?

Source: Yahoo Finance. Graphic credit: Janice Nelson.

From the modest body of research that does look at competition issues in Canada, what do we know about the competitive environment? Discussions of “competitiveness” framed in terms of Canada’s poor performance relative to peer countries may miss links to domestic competition. One popular view holds that Canada cannot afford strong domestic competition policy and that our firms require special accommodation at home (in the form of lax enforcement of domestic competition laws) in order to compete effectively abroad. This thinking is flawed: Canada’s low-competition environment and concentrated domestic sectors reduce productivity and stifle the growth of new Canadian growth champions, and our markets may need more competition to help newer companies achieve scale.

Michael Porter famously addresses the importance of domestic competition in Competition and Antitrust: A Productivity-Based Approach and The Competitive Advantage of Nations

When local rivalry is muted, a nation pays a double price. Not only will companies face less pressure to be productive, but the business environment for all local companies in the industry, their suppliers, and firms in related industries will become less productive. This demonstrates in particular the danger in arguments about the creation of ‘national champions’ in an industry in the home country in order to gain the scale to compete internationally. Unless a firm is forced to compete at home, it will usually quickly lose its competitiveness abroad.”

Despite disquieting indicators of the persistence of large, old firms, falling business investment, capital flight, and declining corporate R&D, recent consolidation trends in Canada are not well characterized. We need a better understanding of the dynamics and implications of concentration in Canada, especially in a post-pandemic recovery.

Competition Commissioner Matthew Boswell recently delivered a scorching address to the Canadian Bar Association, noting: “Money alone will not solve Canada’s competition challenges, which include high levels of business concentration, weak business dynamism and widespread regulatory barriers to competition.”

Economist Stephen Tapp explored the “start up slow down” in a 2015 Policy Options piece, wherein he warned Canadians that the research shows Canada has seen declining entry of new firms, fewer start-ups, and no increase in job turnover relative to past performance. 

When it comes to firm size, “big” must be recognized as a means, not an end. Big can be “beautiful“ if it enhances growth, if it increases productivity, if it raises wages, if it lowers costs to consumers, if it grows exports, and if it delivers prosperity to Canadians. When small companies grow into mid-sized companies, and mid-sized companies grow into large companies, employment and productivity increase markedly, as Viet Vu, Steven Denney, and Ryan Kelly recently demonstrated in their report on Canadian scale-up companies. In fact, productivity gains seem to be far more concentrated in fast-growing mid-sized companies than in large ones, at least in Canada.

The next 50 years will see the advent of new industries that will spawn large, globally competitive companies in sectors including virtual reality and the metaverse, electric vehicles, nuclear power, orbital industries, biotechnology, and others. Given that Canada’s largest companies have barely turned over in more than a century, and given our historic and ongoing weakness in intangible-dependent sectors, our participation in and prosperity from these growth sectors is anything but guaranteed. We must get our act together and determine what forms of competition and economic policy will allow Canada to grow into something more than a land of mortgages and minerals.

We deserve a comprehensive review of the Competition Act, much more research on the dynamics of competition and concentration in the country, and a real discussion about business dynamism. Canadian equity markets have underperformed balanced international portfolios for more than four decades.

Canada’s present large-scale enterprises have collectively failed to change the country’s downward trajectory in productivity growth. If present (or larger) enterprise scale is the solution to this country’s economic doldrums, it falls to advocates of big business to demonstrate not just that large companies pay higher wages, but how Canada’s large companies can drive real growth beyond what the country has achieved in the past few decades. It’s nearly 2022, and despite international consolidation and ever greater scale in the beverage industry, Mexicans still don’t drink Molson.

We should have more scale-up and growth companies, and we should have big businesses with returns to scale that benefit consumers, investors, employees, and Canadians more broadly. But let’s acknowledge, first, that what we’ve got now has driven us through decades of low capital investment, declining R&D spending, and crummy equity returns. 

Big businesses may yet set Canada on a new growth trajectory. Those big businesses will almost certainly be newer and younger big businesses, though. If past performance is any indication, new dynamism won’t come from the old low-growth, low-innovation, low-tech big businesses that have dominated Canada’s markets for too long.