06/15/2012 01:35 EDT

Canada Auto Industry Returning To Pre-Recession Norms, Minus Jobs


Canada’s battered auto and transportation sector is bouncing back to life, but jobs in the sector aren't, new data suggests.

In a note to investors on Thursday afternoon, Bank of Montreal economist Robert Kavcic observed that capacity utilization in the auto industry rose to nearly 81 per cent in the first-quarter, not far off the pre-recession level of 83 per cent.

Meanwhile, utilization in the transport equipment manufacturing sector approached 90 per cent, the highest level since the first quarter of 2007 -- “effectively closing the hole that was carved open during the recession,” Kavcic wrote.


Capacity utilization, or the percentage of the manufacturing potential that’s currently being used to produce goods, is a good indicator of strength in the sector, as higher utilization tends to push prices -- and employment growth -- upward as demand outpaces capacity.

But as Kavcic told The Huffington Post, this rebound has yet to filter through into the job market in a meaningful way. Despite an uptick in manufacturing jobs over the past six months, he says there is still a significant gap between the output and job growth in the durable goods sector, which includes autos and transportation equipment.

In the first-quarter of 2012, there were 173,000 fewer jobs in this sector than at the same time in 2007.

“Capacity has ramped up, whereas job growth has lagged,” he said.

Some of the explanation for this discrepancy is cyclical -- following a downturn production generally ramps up before employment as manufacturers make use of underutilized machinery -- but Kavcic says that there is also a longer term trend at play.

“Manufacturing is losing [its] share of the Canadian economy, and that’s probably not going to stop anytime soon, given we’re seeing more and more production shifted to lower cost jurisdictions [...] and you still have a very strong Canadian dollar that is keeping up relative manufacturing costs in Canada,” he said.

The rebound in capacity utilization is yet another indication that Canadian workers have yet to share in the bounty of recovery.

In February, HuffPost reported on the yawning gap between manufacturing jobs and sales. Though sales had rebounded to pre-recession levels, employment was still 200,000 below what it had been before the recession.

(Overall manufacturing sales have since posted a slight dip, but the auto industry continues to ramp up, with motor vehicle sales in April rising to the highest level since November 2007.)

While the downturn may have quickened the decline in manufacturing jobs, this trend was well underway before the recession.

Canadian Auto Workers union spokesman Angelo DiCaro says the sector has shed nearly 600,000 jobs since 2002, over half of which were lost in Ontario, where manufacturing sales “are still below levels seen in the late ’90s and early 2000s.”

“We’ve seen such a collapse in manufacturing production that any uptick that we’re starting to see, we’re just nowhere near where we were,” he said. “When you start looking at the jobs, I don’t know if we’ll ever be where we were less than a decade ago.”

The bulk of the employment loss in the past decade occurred in 2008 and 2009, in Ontario’s once-robust auto industry hubs.

“A lot of that employment has been difficult to recover,” he said. “It’s difficult to say if those jobs will come back or not.”

As employment growth moves to other sectors, such as service and construction, DiCaro says the shift does not bode well for workers, who are often faced with lower wages, greater job insecurity and fewer employer benefits than traditional manufacturing jobs offered.

“We’re not trading off those job losses for equivalent jobs,” he said.


Manufacturing jobs in Canada went into a steep decline even before the recent economic troubles began. According to StatsCan, employment has been in decline since 2004. Here are the 10 fastest-shrinking sectors from 2004 to 2008, when the recession began.

Photo gallery The 10 Fastest Shrinking Manufacturing Sectors In Canada See Gallery