DISTURBING TREND OF CANADA/ALBERTA EMPLOYMENT SCENARIO – DESIGN AND ENGINEERING/WHITE COLLAR JOBS DISAPPEARING SWIFTLY

First let’s look at the numbers reported by Canadian economy regarding month of May 2014: Canada's unemployment rate rose to seven per cent from 6.9 per cent over the previous month; the economy actually shed 29,100 full-time jobs in May. As a consolation, there was a gain of 54,900 part-time jobs, most of them likely temporary seasonal work.

Among sectors that lost jobs, the natural resources industry declined by about 23,000, and there were about 21,000 fewer workers in finance, insurance, real estate and leasing. Manufacturing was also down by 12,200 and construction was largely flat. Alberta saw the strongest gains, with 16,400 new jobs, and Newfoundland and Labrador lost 4,100 positions, but the other provinces saw little change in their employment rates.

The number of working Canadians aged 15 to 24 increased by 49,000 (this is attributed to many university and college students finishing their spring term in April and seeking out work for the summer) bringing their employment to a level similar to that of May 2013. However, this was partly offset by fewer employed men aged 25 to 54.

Still, there are 1.3 million unemployed Canadians, evidence of an economy that has run out of steam after churning out strong job gains in the first few years following the 2008-09 recession. One bank’s chief economist says the latest report "pounds home the point that underlying Canadian job growth remains anemic." He further adds, "Even those modest gains are almost entirely concentrated in piping hot Alberta, with the rest of the country managing just 0.1 per cent growth in the past year."

Now, let’s sift the grain from the chaff and also look at some aspects no one is talking about in Canada for whatever reasons – failing to notice in the first place due to ignorance and/or mediocrity, or, not having the guts to stand up and speak about it.

First, about the so-called ‘piping hot’ jobs in Alberta. These are mostly in the construction (sustaining capital and some new capital investment projects), drilling, and maintenance. As we know, these jobs tend to support associated service sector, therefore, there is some addition of jobs in this sector too.

But the most disturbing aspect of jobs in Alberta (and to a reasonable extent in Canada) is that there is continual decline in white collared jobs in design and engineering (in the EPC companies) in particular and other sectors in general. Reasons?

a)      Drop in new capital projects in oil sands by large, medium and small companies due to increasing pessimism in the investing companies (recent example: TOTAL deciding to put $10 billion project on hold for indefinite period);

b)     Owner companies in Alberta insisting on farming out large chunks of engineering work to offshore places, e.g., China, India, Philippines etc. in order to depress total engineering costs.

The combined effect of the above reasons and especially ‘b’ is that more and more engineering work (from FEED and Detailed Engineering) is getting shipped out of Canada. The direct impact of this in Alberta (and EPC companies located in other provinces of Canada) is increasing job redundancies and hence more and more layoffs.

The way things are going, eventually, the EPC companies in Canada would be doing just the concept evaluation, the design basis memorandum (DBM) and a bit of FEED. Consequently, the engineering work force will continue to shrink and large number of experienced engineers and technologists would either go to other countries (wherever they find jobs) or take on jobs much below their competence level. This would potentially have a domino effect – overall decrease in service sectors’ size and contribution to economy (remember, service sector contributes about 70% to Canadian economy).

One may argue that the proposed LNG projects would pick up the EPC houses’ slack increasingly discernible in Alberta. Unfortunately, that’s not going to happen. Why? Because the bulk of engineering will be done by the companies in Japan (example, JGC, Chiyoda), Korea and US (example, KBR, Foster Wheeler). Only some residual engineering work will be done in Canada.

The other industries, namely, mining are also seeing sluggishness and new capex projects are few and far between. There is hardly any basic design and development engineering taking place in manufacturing industry also. This is coupled with another very disturbing situation: sharp decline in intellectual property generation in Canada which is causing atrophy of design and engineering work in those areas.

So, the net effect of above would be that gradually, for all intents and purposes, Canada will get reduced to a body supplying country for construction industry, drilling, and service sectors, essentially, blue collared jobs. The white collared jobs will decline.

To have blue collared jobs is not bad but disappearance of white collar jobs would mean negative impact on service sector (from new higher mortgages, to new homes building, to new vehicles purchase and so on). Of course, this impact would not be felt immediately, it would take a while before StatsCan and the government in Ottawa would notice the significant negative impact on the economy.

Canada was at one time at the cutting edge of knowledge based activities, but that situation is rapidly metastasizing to such a degree that Canada’s leadership in technology and engineering will turn in to a myth. The situation is getting exacerbated by reluctance of Canadian companies to invest in innovation, R&D and productivity enhancement activities. 

The above indeed is very sad for Canada. If the Federal and the Provincial governments do not show guts and take timely corrective actions, things would continue move from bad to worse and Canada would morph from being a first world knowledge powerhouse to a second or third world body supply warehouse.  

CANADIAN ECONOMY 2014 AND BEYOND: DARK CLOUDS LOOM AS POLITICIANS AND CORPORATE HONCHOS EXCEL IN INCOMPETENCE

Canada’s economy lost 45,900 jobs in December 2013 and the unemployment rate rose to 7.2% from 6.9%. The employment data released by Statistics Canada on 10 Jan 2014 was the weakest since March 2013. The report also showed hiring in 2013 was the slowest since 2009.

The worst part of the news is that all in all, 60,000 full-time jobs were lost - the monthly drop in full-time work is the largest seen since late 2011. It's the worst showing for jobs overall since March 2013 when Canada lost 54,500 jobs. As one economic analyst put it “the job losses announced on 10 Jan wiped out most of the gains over the last four months.” Further very disturbing aspect was that two major employment centres lost jobs - Ontario lost 39,000 jobs during the month and even Alberta, a source of recent strength, shed 12,000 jobs.

But what did the Canadian federal Finance Minister say about this serious setback? "We sympathize with those Canadians who lost their job last month. This is a reminder that the economic recovery remains fragile and we must stay focused on our plan to grow the economy and keep taxes low to create the environment where job creation can flourish."

What a meaningless stupid statement intended to obfuscate the crass incompetence of the leadership at various levels!! However, the grim situation that Canadian economy finds itself in currently is not due to the current federal leadership – it is the result of collective gross incompetence of the following:

a.      Politicians at federal level (of the three major parties)

b.      Provincial leaderships (British Columbia, Quebec, Ontario)

c.       Corporate leaderships (oil companies, pipeline companies, various manufacturing and commodities’ companies)

The abovementioned people failed the nation and are responsible for beginning of decline in Canadian economy and wellbeing at large (decline in overall health care and senior citizens care, falling educational standards, decline in innovation to name a few) that can become catastrophic if corrective actions are not taken quickly.

And, why are corrective actions required urgently? It is because of the reason that Canadian economy is dependent on (approx. percentages):

-           65% on domestic consumption (which is dependent on people’s purchasing power)
-           30% on exports
-           78% on service sector (which provides the solidity and basis to people’s purchasing power)
-           20% on manufacturing

The above data should intuitively nudge anyone’s common sense to comprehend that if the purchasing power of Canadians keep declining (due to loss of jobs, stagnating economy, lack of new projects, lack of new export avenues/products etc.) there would be potential for serious negative impact on Canada’s overall wellbeing and existence/subsistence as a wealthy, prosperous first world nation.

Let’s see in brief how the factors mentioned at ‘a’, ‘b’, ‘c’ mentioned above failed the nation:

Incompetence of federal politicians

-         The politicians failed to act proactively in ensuring that vital Canadian resources, like, oil and gas find alternate export outlets – the Conservatives woke up much late in the day to the realization that Canada needs alternative outlets for its oil and gas.

-        Finally when the Conservatives started to push for alternatives, the NDP, and to some extent the Liberals, kept damaging Canada’s cause (in regard to alternate avenues for oil and gas) by barking in unison with the fear mongering environmentalists (based on inconclusive aspects of global warming).

-         The self-serving politicians’ canine like in-fighting seriously damaged Canada’s prospects in getting a head start vis-à-vis its competition - the US have already stolen lead over Canada in LNG export. The foreign investors still do not know if the much touted LNG projects in Canada will at all reach the stage of fruition.

-         The federal level politicians failed to act proactively in identifying alternate markets for Canadian products. The head-in-the-sand attitude of federals folks prevented them from realizing that keeping all the eggs in one basket, namely, depending on only US as the export destination was suicidal.

-         The federal level politicians failed to kick on the back sides of the top corporate leadership to show more innovation and initiative in promoting/developing their major projects without hanging on to the coat tails of the politicians (more on this later).

Incompetence of provincial politicians

-         The provincial politicians in BC and Quebec displayed disgusting parochial and dog-in-the-manger attitude towards blocking potential oil and gas projects of Canada (e.g. Northern Gateway pipeline, Kinder Morgan Trans Mountain pipeline, West to East Pipeline, LNG pipelines, and LNG projects).

-         The obstructionist approach of the politicians of BC, Quebec and, to some extent Ontario (who later seemed to be more supportive to West to East pipeline project) caused and are still causing serious delays in decision making of some of the vital projects of national interest. These politicians seem too interested in their own power grabbing shenanigans and seem too willing to overlook what is potentially good for Canada.

Incompetence of corporate leadership

-         The pipeline companies’ leadership failed to be pro-active in engaging with local stakeholders (e.g. First Nations, provincial leadership) in the context of their major pipeline projects. They displayed pathetic propensity to hang by the coat tails of provincial politicians (Alberta) and Federal politicians in taking up the issues which these companies should have tackled themselves;

-         Some of the oil and pipeline companies displayed unfounded overconfidence that politicians would get them the necessary clearances in other countries (e.g. Senators/Congressmen would help out in US).

-         The oil and pipeline companies failed to proactively plan for alternate solutions. They are waking up 5 years late that alternate means of transport is needed to transport bitumen to US. The risk assessment and contingency exercises of these companies have been horribly third rate and complete failure.

-         The corporate leadership of manufacturing companies did little to keep the innovation edge going and/or to find new products and new markets.

-         The corporate leadership of some other commodity producing companies failed to anticipate coming changes in the world markets and were less than adequately prepared to face the challenges of change (e.g. Potash, Fertilizer, Gold, Uranium).

What to do now?

-         Learn the lessons from the above.

-        Get over the self-defeating notion of ‘we-know-the-best’ and ‘frog in the well’ mentality. Go out of Canada, see what alternative stuff is being done out there and bring back the knowledge to adapt the same to Canadian conditions.

-        Politicians of all stripes got to act unitedly in getting policies implemented which are in interest of Canada (and not invest energy in unproductive nonsensical debates stemming from self-aggrandizement fetishes).

-        Fast track projects that can create jobs in thousands, add to Canada’s GDP (all political parties must act unitedly in making them a success).

-        Further heighten the ‘commerce’ focus of the Federal ministries (implemented recently by the Conservatives).

-       Make sure the foreign investors are re-assured of the definitiveness of the proposed projects in Canada and their economic returns.

-        Crank up efforts to find alternate outlets for Canadian products, services (in Asia, Latin America and Africa)

-       Keep investor friendly environment in Canada and in Canadian provinces.

Consequences of not acting soon

-        The window of opportunity for export of Canadian resources would not remain open for ever – if the Canadian politicians, corporate honchos do not act quickly and decisively, Canadians would keep sitting on piles of their natural resources for the rest of their lives and keep sucking their thumbs.

-        The politicians must realize that dog-in-the-manger politics would not only consume the Canadians, the resultant implosion would wipe them out too.

-        Canada’s existence of being a successful, happy, good performing first world country would seriously get compromised.

-        Falling standards could trigger disaffection which could bring about potential serious fractures in the multi-cultural foundation of Canada.

Let’s hope the Canadian politicians and the people would rally round and come together to meet the current challenges.