Canada’s small businesses mitigate sluggishness in labor market

Business confidence and hiring in Canada are continued to be weighed on due to persistent sluggish pace of Canada’s post-recession rebound and increased uncertainty in global economy. Canada’s employment, since its 2009 cycle low, has risen at an average annual pace of only 1.1 percent as compared with a 1.9 percent annual rise in the seven years leading up to the downturn, noted Scotiabank in a research report. Demand for labor has weakened to a year-to-date an annual rate of 0.6 percent year-to-date. This is quite below the typical expansionary cycles.

Small businesses, during this period of sub-par growth, have played an important role in mitigating a sharper deterioration in activity. Annual payroll growth in small companies averaged 1.4 percent from 2010-2015. This is quite stronger than the 0.9 percent rise amongst huge companies. Small companies generated over 500,000 net new jobs in the period, said Scotiabank.

The rising significant of small companies in job creation is a reversal in the trend of the early years of the new millennium when huge companies dominated hiring. Employment in huge companies rose at an average annual pace of 2.4 percent from 2002-2008, surpassing the 1.5 percent year-on-year rise in employment recorded by small firms and 1.3 percent rise recorded by medium-sized companies. Nearly 40 percent of Canada’s employees work for small companies, the highest level in one decade.

The shift to small firm hiring shows the nation’s shifting industrial performance, according to Scotiabank. Several leading industries in job growth after the recession are dominated by small companies such as real estate, construction, professional services and accommodation & food services. Also most are labor intensive.