Millan Mulraine, an economist at the Toronto Dominion Bank, authored a report out today “What’s Behind the Canadian Manufacturing Sector Recession?”. (PDF) Those interested in the policy debate surrounding manufacturers — the whole McGuinty vs Flaherty thing — will find it interesting reading (It’s only 8 pages). Here are the bits I’ve underlined:
- … the Canadian manufacturing sector has survived the massive rally in the loonie and the relentless march of the Chinese export juggernaut — though it has the cuts and bruises to show for the effort.
- We identify three' key contributory factors to this survival, namely the above (economy-wide) average productivity gains in the sector, favourable domestic economic conditions, and supportive labour market dynamics.
- We identify three key contributory factors to this survival, namely the above (economy-wide) average productivity gains in the sector, favourable domestic economic conditions, and supportive labour market dynamics.
- After reaching a recent peak of 15.3% in 1999, the Canadian manufacturing sector's share of total employment has steadily declined to a historic low mark- standing at 11.7% by the end of 2007.
- …the evidence suggests a dramatic decline in the importance ofthe manufacturing sector to Canadian economic activity, while the importance of the service sector has risen appreciably.
- The decline in the manufacturing sector is in no way unique to Canada. In fact, across the industrialised world there have been similar long-term trends of downward shifts in the size and importance of the manufacturing sector over the past three decades.
- …there are indications that the financial position of the surviving manufacturing firms is not entirely dire. In fact, the rationalization of activity in the sector has been to increase efficiency in the remaining firms ensuring that the sector has remained profitable.
- The stark disparity between the rate of capital expenditure between the manufacturing sector and the economy as a whole has grown particularly pronounced in the recent years.
- …the Canadian manufacturing sector has been outperformed, by its US. counterpart on the dimension that is most is important for long-term survival. That is labour productivity. And while this is clearly the case for the entire Canadian economy as a whole, the problems that this will engender in the manufacturing sector which will he competing directly with U.S. manufacturers are certainly more acute.
- …the lagging of Canadian manufacturing sector behind the U.S. on the productivity front will continue to neutralise the other advantages such as the lower private health care costs that the Canadian manufacturers have enjoyed over the years.
- In the case of the U.S. manufacturing sector, the increased productivity has resulted in wages rising by 63% since 1997, while in Canada the rise was a more modest 39%. Moreover, since 2001, the increases were 30% and 24%, for the US. and Canada, respectively.