We recently did a deep dive into the performance of the B.C. labour market over the last year or so (available at bcbc.com). What we found leaves us concerned about the underlying vitality of the private-sector economy.
Last month, the total number of people working in B.C. inched ahead by just 1,400 following a similarly small gain in April and no job growth in March. Over the past year, job creation has softened markedly, with overall employment in the province up one per cent from year-ago levels.
The Labour Force Survey reveals that job creation in the private sector has flatlined, with B.C. standing apart from other provinces in this regard. In May, the number of private-sector employees was roughly 17,000 lower than in April 2022. In sharp contrast, public-sector payrolls have swelled by more than five per cent. In fact, this is the only reason total employment crept higher over the past year.
In the rest of Canada, year-over-year private-sector employment growth dipped from a scorching six per cent in early 2022 to between 2.5 and three per cent recently. In B.C., private-sector job growth has declined further and faster than elsewhere in the country.
The surge in public-sector payrolls also sets B.C. apart. In the rest of Canada, the number of public-sector employees is about 1.5 per cent higher than a year earlier, compared to more than five per cent here. Negative net private-sector job creation and weak overall employment growth have resulted in B.C.’s unemployment rate ticking higher since last spring.
An important reason why private-sector employment has slipped is steep job losses in manufacturing (down around 11 per cent year over year as of May 2023). While cyclical factors explain some of this, a high-profile example of the broader sluggishness in manufacturing is the wood products manufacturing industry. Not only have North American housing starts and lumber prices dropped since early 2022, but serial policy changes in B.C. have substantially reduced the fibre supply, leading to multiple mill closures and sizable job losses (affecting both lumber production and logging). Net employment gains in a few other goods-producing industries (mining, oil and gas, agriculture) have been more than offset by the disappearance of roughly 24,000 manufacturing jobs in the last year – with the forest sector accounting for many of these.
Across all service-producing industries, B.C. has seen no net increase in private-sector payroll jobs since April 2022.
While public-sector employment has increased at a super-charged pace, the picture varies by segment. Employment in the government-run portion of health care is actually lower than it was in April 2022. The big expansion in public sector-payrolls instead is mainly due to outsized growth in public administration and public-sector education. In neither case is it clear why so many more employees are required.
The flatlining of private-sector job creation coupled with frenetic growth in public-sector payrolls presents a troubling picture. Without a healthy and expanding business sector, an ever-larger government-run sector eventually becomes fiscally unsustainable. This may be the path B.C. is now on.
This is not just a recent development. From 2019 through the first quarter of 2023, private-sector payroll jobs in B.C. increased by a meagre 1.2 per cent, while in the rest of Canada they grew by more than six per cent. It’s possible that the cumulative impact of significant changes in provincial taxes, policies and regulatory settings is now being felt across the private sector. This thesis is given weight by a recent Greater Vancouver Board of Trade report documenting several billion dollars of government-imposed tax and fee hikes since 2016 that affect all parts of the business community. It is time for policymakers in Victoria to revisit their government-centric view of how the economy operates and start paying more attention to the competitive environment facing the private sector, which still provides more than three-quarters of all jobs in the province.
Jock Finlayson is the Business Council of British Columbia’s senior adviser; Ken Peacock is the council’s senior vice-president and chief economist.
