Ontario job creation falls well short of plan

100,000 new Ontario jobs per year forecast

If Ontario tries to cut its way to a balanced budget, weak employment figures suggest the cuts may have to get a whole lot worse.  Here's why.  

In the Budget, the government projected 100,000 job growth in 2014, 2015, 2016, and 2017. That's an annual increase of about 1.4%. 

But the government is having a problem meeting its jobs target in 2014.  

Comparing the average of the first six months of 2013 with the first six of 2014 shows an increase from 6.861 million jobs to only 6.904 million.  That's only 43,000 new jobs over the year, an increase 0.65% -- less than half of the government's target.  

The Public Sector: Given sharp public sector austerity, the main brake on job creation has been public sector employment. 

Even without Tim Hudak, public sector employment has decreased between the first six months of 2013 and the first six months of 2014 by some 40,000 jobs.  

The good news is that the decline may be easing.  For the most recent month reported, June 2014, public sector jobs were down only 18,700 compared with June 2013.  Earlier in 2014 we were much further back:  in February 2014, Ontario had 57,300 fewer public sector jobs compared with one year earlier.

Public sector job losses holding back job growth in Ontario

Given the austerity both the provincial Liberal and federal Conservative governments propose, public sector jobs are likely to continue to be a brake on job creation.   

The Private Sector: There are some signs of life in private sector job creation, but not nearly enough to offset public sector austerity.  

Private sector employment has increased by 80,400 jobs, comparing the first six months of 2014 with the first six of 2013.  That is a 1.8% increase. Notably, however, for the most recent month reported, there was a loss of 49,600 private sector jobs –  a one month 1.1% drop in the number of private sector jobs.  

49,600 private sector job losses in June 2014 in OntarioSlow job growth and the impact on public services and public healthcare:  The recent provincial Budget was of course an election Budget  -- so it plans a larger funding increase than we have seen in recent years. A whopping 2.55% program funding increase is officially planned. In contrast, the previous three Budgets only increased program spending 4.1% in total. At an annual rate, that is about half the increase proposed in the election Budget .

Many voices for big business are now urging the government to return to a full on attack on public spending. 

Obligingly, the Ontario government’s spending plans for the following three years are extremely grim, much worse even than the three Budgets before the election Budget. A tiny 0.59% increase is proposed for next year, followed by 0.08% (yes  -- 8 one hundreds of one-percent) in 2016-17, followed by a spending cut of 0.67% in 2017-18 to balance the Budget.  In fact the plan is to spend exactly the same in 2017-18 as in 2014-15. 

With inflation and population growth, this means significant real cuts in programs. Even the Globe and Mail estimates this at a real spending cut of 3% per year.

The jobs and growth solution: One easy way out of such an unsettling picture for public sector services (and public sector workers) would be better than expected growth, and better than expected job growth.  

So far, that is not happening.  Quite the reverse.

Of course, it is early days yet.  We will see where the job and growth outlook goes in the months leading up to the next Budget

But without some improvement, even the draconian spending plans now in place may not be enough to balance the budget.

Cutting real public spending is the government's main strategy to end deficits. But it is coming with weaker than planned employment growth and that means we may fall short of the government's plan for revenue growth.  That will drive up the deficit and we are back to square one.  

What's the option then?

If jobs and growth fall short, other ways to deal with the deficit would be [1] more public spending cuts or [2] revenue increases or [3] simply putting off balancing the budget.  More on those options next week.

The full Statistics Canada numbers behind this employment report can be downloaded here.  


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