06/22/2011 06:15 EDT | Updated 08/22/2011 05:12 EDT

Canada Wood Product Industry To Add 9,400 Jobs: Report

THE CANADIAN PRESS -- MONTREAL - Canada's wood products sector is expected to add jobs for the first time in several years in 2011 as sawmills start up and increase production, the Conference Board of Canada said in a report released Wednesday.

Some 9,400 jobs are expected to be added, marking an 8.3 per cent increase from the low point in 2010. Employment is expected to reach 121,100.

Since 2006, the battered forest products industry has shed about 54,000 jobs. Employment levels are expected to increase to 152,400 in 2015.

Rising employment will increase labour costs by 7.9 per cent, said the report.

"At the same time, longer workweeks and improved hiring conditions are pushing up average weekly wages, especially since the industry may have to lure back workers who left for other industries over the past few years."

The Ottawa-based economic forecaster said the industry will lose some momentum in 2011 but still record its second consecutive year of profitability.

The board says ongoing weakness in the U.S. housing market and a slowdown in residential construction in Canada are limiting growth of demand for wood products.

“However, the industry is expected to remain in the black in 2011, thanks to cost-cutting measures implemented in previous years and industry efforts to diversify away the U.S. market,” said Michael Burt, associate director of the Conference Board.

Last year's strength was driven primarily due to Canadian housing starts and rising exports to China.

It forecasts that production growth will to slow to 3.9 per cent this year down from an increase of 10.7 per cent in 2010.

Exports of wood products totalled $8.4 billion last year, with 69 per cent of the material being shipped to the United States.

Exports are expected to grow by 11.6 per cent next year in real terms and expand on average by 8.6 per cent annually from 2013 to 2015.

The U.S. housing industry, a major consumer of wood products, has had mixed results. Housing starts fell by four per cent in April and were 12.8 per cent lower than the prior year. But new home sales and average house sale prices were up in April.

"Due to the drastic manner in which housing starts fell over the last five years, it will take several years of recovery before the U.S. housing market returns to full health," the report stated.

The Canadian housing market is expected to be cooler in 2011 because of strained consumer finances and expected higher interest rates. Housing starts are expect to drop by 7.5 per cent.

Starting in 2012, an improvement in residential construction activity in Canada, rising exports to China and the long-awaited recovery in the U.S. housing market should support stronger production growth.

Production is not expected to return to its 2005 peak, however, until after 2015.

The industry returned to profitability last year after losing $1.6 billion between 2007 and 2009.

Pre-tax profits are expected to increase this year by 13.8 per cent to $694 million. Profit margins will hover around 3.6 per cent in 2011 and continue to rise over the next four years.

Industry revenues should increase by two per cent to $19.3 billion in 2011 and surpass 2007 levels to reach $25.65 billion by 2015. But prices will edge up only 0.5 per cent because of the strong Canadian dollar.