Volatility of manufacturing employment by region: the effects of specialization and trade

The study Regional manufacturing employment volatility in Canada: The effects of specialization and trade measures the stability of manufacturing employment growth in Canada from 1976 to 1997 across a broad spectrum of rural and urban regions. It covers the entire scope of manufacturing economies in Canada, from small one-industry towns to the large, diverse manufacturing economies found in large cities.

It also examines the extent to which differences in the volatility of employment growth across regions and changes in volatility over time are related to free trade.

Labour market stability is regarded as desirable both by workers and by planners who are providing infrastructure such as schools, roads and hospitals. The economic stability of manufacturing employment varies across rural and urban communities in Canada; stability has generally declined - or, conversely, volatility has increased - over the past 20 years.

According to the study, workers can expect employment to be relatively stable in communities that were on average more export-intensive and had a diversified economic base, larger plants and modest employment growth rates. Canada's growing links to international markets through trade have typically not led to regional economies that suffer from more economic shocks. Rather, trade is usually associated with economies where employment is more stable.

Comparisons across rural and urban regions indicate that the cores of large metropolitan regions, for example, the cities of Montréal and Toronto, are the most stable areas. Rural regions, which include towns such as Truro, Nova Scotia or Castlegar, British Columbia, are the least stable. Manufacturing employment growth rates in rural economies were on average 10 times less stable than those found in the centres of large cites.

In general, communities with strong export links to international markets are more stable than communities whose industries focus on sales to domestic markets. However, the effect of exports on the stability of regional economies is not always positive. The study shows that smaller manufacturing centres, those with employment of fewer than 1,000 jobs, react differently to increases in export intensity than larger manufacturing centres, those with employment greater than 1,000.

For smaller centres, growing export intensity - exports as a proportion of shipments - was associated with less stable employment growth, while the opposite was true of larger centres. Therefore, for smaller centres, whose economies are very sensitive to the opening or closing of one or two plants, increased trade results in stronger fluctuations in their economic growth.

More diversified manufacturing economies are more stable. One reason that rural economies are more volatile than large urban economies is that they are far more specialized; they are more likely to be one-industry towns.

Regions with large manufacturing plants also provide more stable employment growth than regions that have small plants. This finding is consistent with the fact that smaller plants tend to be newer and more vulnerable to closure.

There is a trade-off between high growth rates and stability. Those regions that experience higher rates of employment growth also tended to be less stable. Economies that experience high growth in one period are all too likely to decline in subsequent periods.

The economic analysis research paper Regional manufacturing employment volatility in Canada: The effects of specialization and trade (11F0027MIE2003005, free) is now available on Statistics Canada's website (). From the Our products and services page, under Browse our Internet publications, choose Free, then National Accounts.

Also available on Statistics Canada's website is information on related papers on economic geography (/english/studies/eaupdate/geo.htm). From this site, click on Highlights to access a condensed version of the research paper released today.

For more information, or to enquire about the concepts, methods or data quality of this release, contact John Baldwin (613-951-8588) or Mark Brown (613-951-7292), Micro-Economic Analysis Division.