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Canadian Employment Driven By Small Business

Written by Posted On Tuesday, 14 October 2003 00:00

Canada's economic future depends on support provided by the small business sector during periods of slower job creation, according to Scotiabank's recent small business economic report, Small Business ... Supporting National Employment as Job Creation Slows. Companies in the construction and real estate industries, and related service areas, play a major role in small business growth.

"Small business typically plays a counter-cyclical role," says Mary Webb, Senior Economist at Scotiabank. "This was well illustrated during the early 1990s. When private-sector payrolls were contracting from 1990 to 1993, microbusinesses with less than five staff continued to hire. For the bigger players in the small business sector, the decrease in employees was less pronounced than for larger firms, and they returned to sustainable employment growth more quickly. In contrast, corporations with over 500 employees reported the most dramatic lay-offs during the early 1990s, and significant expansion of their payrolls did not resume until 1997."

Canadian companies of all sizes have been vulnerable to the string of unforeseen events gripping the country, from the SARS outbreak to the recent devastation on the East Coast from Hurricane Juan. Canada is also grappling with more fundamental developments, notably the slow global recovery, extended trade frictions, the Canadian dollar's sharp appreciation and increasing competition from the emerging economies in Asia. Canada's larger corporations are particularly sensitive to these fundamental changes, and their efforts to restructure and reinforce their bottom lines are expected to constrain their hiring into 2004.

In the current environment, small business has the important advantage that it is less exposed to export markets and to the domestic industries where import competition is especially intense. Small business is driven by population growth and domestic spending which remains strong in the housing sector, related domestic suppliers, information technology services and a range of personal services like mortgage financing. Current low interest rates -- and the prospect that the Bank of Canada is expected to ease further if the Canadian economy remains sluggish and the Canadian dollar continues to climb -- should help to maintain momentum in these areas of domestic expenditure as well as reducing the cost of small business financing.

When considering a location for your business venture or a home for your family, Webb's provincial small business economic forecasts may be worth considering:

  • Fuelling Ontario's small business employment are substantial new jobs in construction and professional, scientific and technical services. Also making a contribution to employment is significant population growth, with the province receiving over half of Canada's international immigrants who are typically well-represented in the small business sector. After weathering the widespread effects of the SARS outbreak and then the power outage in August, small business is expected to bolster provincial employment over the next few quarters.

  • Alberta's small business sector has powered ahead in a number of industries. The positive outlook for smaller firms active in the scientific and technical services required by the province's buoyant oil & natural gas industry is one of several opportunities facing Alberta's small business sector. The province's robust economic expansion and strong net immigration are spurring small business job creation in construction, administrative and support services and retail trade.

  • British Columbia continues to have the largest share of small enterprise employment among the provinces. Small business in British Columbia has posted notable gains in a number of services such as retail trade, the arts and recreation, countering other difficulties, such as the damage from this summer's extensive forest fires and the declines in small business employment already witnessed in the forestry sector. Preparations for the 2010 Olympics will offer a significant boost to British Columbia's important small business sector.

  • Quebec's small business sector has benefitted from the surge in housing construction and the province's attention to social programs, particularly daycare, driven by this new government's commitment to affordable housing and infrastructure improvements.

  • Although Atlantic Canada's traditional small businesses have faced several challenges this year, such as the cod fishery closure and reduced quotas for other species, small business activity is buoyant in a variety of household services in Newfoundland and Labrador and Prince Edward Island while health care and social assistance are growth areas in New Brunswick.

  • In both Saskatchewan and Manitoba, several key service industries are maintaining the small business sector's momentum. Health care, with the aging of the baby boom generation, stands out as an area of significant opportunity for small business.

    "Recent federal and provincial tax cuts are also expected to encourage small business," states Webb. "New Brunswick now boasts a provincial small business corporate income tax rate of just 3.0%, and Alberta is expected to match this rate in April 2004. By 2005, seven of the ten provinces are expected to have a small business income tax rate of 5.0% or less. As small business helps to carry Canada through a period of slower employment growth, it is important to foster the expansion of smaller operations as well as to encourage new start-ups."

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