After a strong start, expect construction hiring to slow later in the year

03/22/2013 by John Clinkard

Following back-to-back increases of 18,000 and 17,100 in the previous two months, employment in Canada’s construction industry increased by a very healthy 15,800 in February.

Over the past year, construction employment has risen by 2.9% year-over-year (y/y) well ahead of the 1.9% y/y increase in total employment. According to Statistics Canada’s February Labour Force Survey, total employment in construction is up 66,400 over the past six months compared to a net gain of 2,000 during the comparable period in 2012. This faster growth of construction employment is consistent with the views expressed in the Economic Snapshot of May 2012 titled “Warning! Construction Employment Ahead” which projected that stronger growth of capital spending plans in 2012/2011 would fuel increased hiring in the sector.

While construction employment has strengthened significantly at the national level, on a regional basis, there are some definite winners and losers. Specifically, in Alberta, total construction employment has shrunk by 1,900 over the past six months, suggesting that the Wild Rose Province has lost some of its appeal as the “go to” province for workers looking for a job in construction.

However, next door in British Columbia, the hiring climate appears to have improved based on the fact that the province added 17,300 new jobs over the past six months almost completely offsetting the 18,300 jobs it lost during the comparable period ending February 2012. In Ontario, over the past six months, construction employment rose by 24,100 well ahead of the 15,900 gain it recorded in 2012, while Quebec added 6,300 net jobs through February 2013 somewhat less than the 10,200 it lost in the comparable period a year earlier.

Across construction industry sub sectors, consistent with the softening in housing demand since mid 2012, growth of employment in residential building has slowed from +2.7% y/y in December 2011 to +0.9% y/y in December 2012.

Also wage growth in the sector has dropped from +4% y/y at the end of 2011 to -9.3% y/y in December 2012. Given the above noted strength in total construction hiring over the past six months, the slower pattern of hiring among residential builders has been offset by strength in non-residential building where employment growth has accelerated from 6.3% y/y in 12/2011 to 9.0% y/y in 12/2012; in engineering construction, where employment growth accelerated from 6.7% y/y to 8.1% y/y; and in specialty trades where hiring rose by 5.3% y/y in December 2012 vs 3.0% y/y a year earlier.

Looking ahead, a number of leading indicators of construction hiring are flashing yellow. First, according to the latest Statistics Canada Survey of Public and Private Investment Intentions, public and private organizations have significantly scaled back their 2013 investment plans.

Compared to a gain of 7.2% in 2012, organizations collectively plan to increase their total investment by a very modest 1.7% in 2013, the smallest annual increase since 2009. By far the major contributor to this slowdown is a projected 2.7% decline in spending by the mining and oil and gas extraction sector. This outlook for slower investment spending is reinforced by weaker growth of profits and little change in industrial capacity utilization throughout the second half of 2012.

Capital spending vs construction employment

Capital spending vs construction employment
Data Source: Statistics Canada/Chart: Reed Construction Data, CanaData.