Study: Measures of employment turnover post 2000, 2001 to 2009

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The relative contribution of firms of different sizes to net employment growth varied substantially from year to year in the early post-2000 period. This was mostly because of volatility in the net employment growth among Canada's largest firms.

This study examined employment dynamics in the business sector between 2001 and 2009, a period that includes an expansionary phase (2001 to 2008) and a recession (2008 to 2009).

Firms with 500 or more employees were net employment losers in four years: 2001, 2002, 2004 and 2009. In 2009, these large firms accounted for 50% of the recessionary net job decline. In contrast, these large firms contributed significantly to employment growth in 2003, 2006, 2007 and 2008.

During the expansion from 2001 to 2008, the four other firm size categories studied all increased their employment every year, and experienced less variation in their net employment growth than the largest firms.

Although the absolute net employment growth contribution of micro-firms (those with fewer than five employees) was relatively unchanged at an average of 41,000 employees every year, their annual share of net employment growth varied considerably, depending on the fluctuation occurring in the largest firms.

Each year, on average, firms with 500 or more employees created and destroyed fewer than 10% of their jobs. Firms with fewer than five employees created and destroyed more than 25%.

The study also found that over the expansionary phase of the decade, gross employment creation and destruction both trended downward, though the decrease in gross employment destruction was steadier.

Employment reallocation, which is the sum of gross employment creation and destruction, decreased steadily, to 20.1% of total employment in 2008 from 25.7% in 2001. In other words, one in four jobs was either created or destroyed in 2001, whereas one in five jobs was affected by employment reallocation in 2008.

As is typical during a recession, employment destruction increased markedly in 2009, up 3.5%, while employment creation slowed, down 1.6%. As a result of the economic downturn, the business sector employed about 369,000 fewer individuals in 2009 than it did in 2008, an annual decrease of 3.2%.

Several features of the 2008 to 2009 recession emerge from the study. The contribution of firm shutdowns to the recession was minor. Exits accounted for less than 15% of recessionary employment destruction, while declining firms, those that reduced their workforce but did not go out of business, accounted for more than 80%.

In fact, during the recession, the number of firms did not decrease, but remained stable. The goods sector suffered a net loss of 7.6% of its employment compared with 2.3% for the services sector.