LABOUR MARKET INFORMATIONA review of BuildForce Canada’slabour market model and background for Construction and Maintenance Looking Forward

Introduction

• The purpose of this review is to:– review core concepts and the structure of the BuildForce

Canada model– answer questions about Construction and Maintenance

Looking Forward– help participants see where their interests are identified

in the system– explain the tables and figures in the Construction and

Maintenance Looking Forward reports and PowerPoint presentations, including:

• measures used, methodology and background• findings and interpretations

Introduction

• The purpose of the BuildForce labour market model is to:– track the state of construction labour markets across Canada– promote awareness and discussion about the state of markets

and implications for industry and government initiatives– offer an analytical tool to industry participants (e.g., “what if?”

simulations)

Introduction

• The purpose of Construction and Maintenance Looking Forward is:– to provide annual reports (PDFs and PowerPoint presentations)

on the state of construction labour markets in all provinces and territories, as well as five Ontario regions

• The reports are based on:– a current macroeconomic and demographic scenario– a current inventory of major construction projects– the views and input of provincial labour market information

(LMI) committees

Introduction

• Construction and Maintenance Looking Forward is driven by a scenario-based analysis.– Each forecast is based on several important assumptions.

For example:• global commodity prices• lists of very large construction projects in each province

and territory– One set of these assumptions creates one “scenario.”– Each scenario is just one of several possible outcomes.

Outline

1. Core concepts2. Model structure3. Market adjustments4. Rankings and mobility5. Frequently asked questions

Core concepts

• The core formulas are:– Labour force = Employment + Unemployment– Participation rate = Labour force ٪ Population

Core concepts

• Stocks are measured at one point in time. For example:– employment– labour force– housing stock– population– registrations

Core concepts

• Flows measure the change in the stocks across a period of time. For example:– investment– housing starts– new apprenticeship registrations– apprenticeship completions– immigration

Core concepts

• Statistics Canada measures:– The reliability of labour market statistics is restricted by:

• smaller markets and limited samples• respondents who self-identify their occupation and industry• employment attributed to region of residence

– BuildForce research and LMI committees improve reliability.

Model structure

• Labour markets in the wider economy

DemandInvestment in construction of new buildings and structures, renovation

and repair work, activity in other industries

Construction labour market

SupplyPopulation by age, gender, education, qualifications, source (natural increase or immigration), ethnicity and participation

Model structure

• Labour markets in the wider economy

Macroeconomics

Demographics

Labour requirements (demand)

The available workforce (supply)

Model structure• Macroeconomics

International• United States• Canada• Provinces

• Business investment

• Government• Households• Other

Non-residential investment• Commercial• Industrial• Engineering• Institutional

Residential investment• High rise• Low rise• Renovations

Tracking majorprojects

Labour requirements (demand)• Trades• Occupations• Managers

Model structure

• Demographics

• Population• Gender• Education• Birth rates• Mortality• Immigration

• Age profiles• Participation• Mobility • Labour force

• New entrants• Retirements• In-mobility

Post-secondary programs

The available workforce (supply)• Trades• Occupations• Managers

Model structure

• Labour markets in the wider economyDemand – Macroeconomics

Supply – The available workforce

Constructionlabour market

Employment

Unemployment

Labour supply

Model structure

• There are two distinct sources of labour requirements (demand) in the model:– replacement demand related to retirement and mortality– expansion demand related to growth in construction activity

• Replacement and expansion demand are measured for 33 trades and occupations (see next slide)

Model structure1. Boilermakers2. Bricklayers3. Carpenters4. Concrete finishers5. Construction estimators6. Construction managers7. Construction millwrights and industrial

mechanics8. Contractors and supervisors9. Crane operators10. Drillers and blasters11. Electricians (including industrial and power

system)12. Elevator constructors and mechanics13. Floor covering installers14. Gasfitters15. Glaziers 16. Heavy equipment operators (except crane)17. Heavy-duty equipment mechanics

18. Industrial instrument technicians and mechanics19. Insulators20. Ironworkers and structural metal fabricators and

fitters21. Painters and decorators22. Plasterers, drywall Installers and finishers, and

lathers23. Plumbers24. Refrigeration and air conditioning mechanics25. Residential and commercial installers and

servicers26. Residential home builders and renovators27. Roofers and shinglers28. Sheet metal workers29. Steamfitters, pipefitters and sprinkler system

installers 30. Tilesetters31. Trades helpers and labourers32. Truck drivers33. Welders and related machine operators

Model structure

• Expansion demand is measured for:– Industry:

• construction• all other industries

– Provinces and five Ontario regions:• Greater Toronto Area• Southwest Ontario• Central Ontario• Northern Ontario• Eastern Ontario

Model structure

• Expansion demand is driven by construction spending by sectors:– residential– commercial– industrial– institutional– engineering– maintenance

Model structure

• Expansion demand is driven by construction spending by sectors:– the macroeconomic model forecasts spending– employment is reported for residential and non-residential totals– specialized analysis tracks project detail

Model structureBuilding requirements

Labour requirements• Employment• Construction• Other industries Available labour force

• Managers• Contractors/supervisors• Trades• Apprentices

Unemployment• Annual• Peak• Natural

MobilitySector Region Industry

YouthWomenAboriginalsImmigration

Does not identify people by trade and occupation

Identifies people by trade and occupation

Population by age / retirement

Training apprenticeship

Available population

Market adjustments

• What happens when conditions change?– The model has three rounds of adjustments:

1. Unemployment changes2. Labour force changes3. Immigration, apprenticeship and other institutional

systems adjust– The unemployment rate is the first, pivotal point.

Market adjustments

• Unemployment is an essential feature of the labour market:– acts as a cushion to absorb shocks– a social cost across the cycle– creates benefits in a balanced market

Market adjustments

• First round adjustments

Year 1 Year 20

200

400

600

800

1,000

1,200

1,400

Labour force Employment

Unemployment

Market adjustments

• Unemployment– There are three different measures:

1. Seasonal 2. Cyclical3. Natural

Market adjustments

• Seasonal unemployment patterns in Saskatchewan

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

0%

5%

10%

15%

20%

25%

30%

Market adjustments

• Cyclical unemployment rates for Saskatchewan

Aug

-76

Aug

-77

Aug

-78

Aug

-79

Aug

-80

Aug

-81

Aug

-82

Aug

-83

Aug

-84

Aug

-85

Aug

-86

Aug

-87

Aug

-88

Aug

-89

Aug

-90

Aug

-91

Aug

-92

Aug

-93

Aug

-94

Aug

-95

Aug

-96

Aug

-97

Aug

-98

Aug

-99

Aug

-00

Aug

-01

Aug

-02

Aug

-03

Aug

-04

Aug

-05

Aug

-06

Aug

-07

Aug

-08

Aug

-09

Aug

-10

0%

5%

10%

15%

20%

25%

30%

35%

Trend

Recession Peak

Market adjustments

• The normal unemployment rate estimates the annual unemployment rate in balanced markets.

Market adjustments

• Unemployment rates, heavy equipment operators, Saskatchewan

2001 2002 2003 2004 2005 2006 20070

2

4

6

8

10

12

14

16

18

20

Unemployment rate at peak Unemployment rate, annual average

Unemployment, natural rate

Market adjustments

• Second round adjustments

Year 1 Year 20

200

400

600

800

1,000

1,200

1,400

1,600

Labour force Employment

Unemployment

Increasedlabour force

New entrants

Increased participation

Otherregions

Otherindustries

Market adjustments

• Change in the labour force:– New entrants– Mortality– Retirement– Net in-mobility

Market adjustments

• Change in the labour force– New entrants:

• number of residents 30 years of age and younger entering the labour force for the first time

– Determined by:• change in population (age 30 years and younger)• construction share of the workforce• labour market conditions

Market adjustments

• Change in the labour force– Mortality:

• the number of persons in the local labour force that pass away during the year based on age-specific mortality rates

Market adjustments

• Change in the labour force– Retirement:

• the number of persons permanently leaving the labour force• persons that take a pension and move to another trade or

take contract work are not included– Determined by:

• the change in participation rates above the age of 55

Market adjustments

• Change in the labour force– Net in-mobility:

• recruiting required by the construction industry from other industries, other trades or occupations outside construction and/or outside other provinces or countries to meet labour requirements

– Determined by:• residual labour requirements

– >0 implies recruiting outside– <0 implies losses to other industries/regions

Market adjustments

• Change in construction labour force in Saskatchewan20

12

2013

2014

2015

2016

2017

2018

2019

2020

2021

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

Net in-mobility New entrants Retirements and mortality Total change in labour force

Num

ber o

f wor

kers

Total change in labour force n = New entrants n + Net in-mobility n -

Retirements and mortality n

Rankings and mobility

• Rankings on a scale of 1 (weak) through 5 (strong) summarize the market conditions.– Regional rankings are a weighted average of four measures

(see next slide).– Differences in market rankings signal the potential for mobility.

Rankings and mobility

• Measures:1. Estimated unemployment rate relative to natural

unemployment rate2. Employment growth3. Net in-mobility as a percentage of the labour force4. Industry survey

Rankings and mobility

• Annual weighting of the criteria:– Surveys are only applied for one year.– The weight attached to replacement demand rises in more

distant forecast periods.– Comments on tables note the potential impacts of mobility.

Rankings and mobility1 Qualified workers are available in local markets. Excess

supply is apparent. Workers may move to other markets.

2 Qualified workers are available in local markets.

3Qualified workers in the local market may be limited by short-term increases in demand. Established patterns of recruiting are sufficient.

4Qualified workers are generally not available in local markets. Recruiting may extend beyond traditional sources and practices.

5 Qualified workers are not available in local markets. Competition is intense.

Rankings and mobility

Labour requirements(Demand)

Labour market rankings

1 2 3 4 5

Significant excess of

supply over demand

Excess of supply over

demand

Moderate supply

pressures

Significant supply

pressures Supply

constraints

Available workforce(Supply)

Rankings and mobility

• Mobility– Differences in market rankings indicate the potential for mobility

in the model.– Dimensions to mobility:

• across industries• Across provinces

Rankings and mobility

• Adjacent markets for heavy equipment operators in Saskatchewan in construction

Heavy equipment operators,Saskatchewan- Other industries

Heavy equipment operators, Alberta- Construction

Heavy equipment operators,Saskatchewan- Construction

Heavy equipment operators, Manitoba- Construction

Heavy equipment operators,Manitoba- Other industries

Rankings and mobility

• Mobility across adjacent labour markets– A market with unemployment below the natural rate will attract

workers from other markets.

1 2 3 4 50

2

4

6

8

10

12

14

16

Market

Une

mpl

oym

ent

rate

1 2 3 4 5

Natural unemployment rate

Conclusion

• Remember, the BuildForce Canada LMI system:– includes the model, reports, PowerPoint presentations,

Construction Forecasts website with detailed investment and labour market data (www.constructionforecasts.ca)

– depends on industry input to refine reliability and market assessments

– is a tool that the industry can use for assessing labour market risks

– includes the Construction Map App website, which tracks the location and schedule of selected major resource construction projects across Canada (www.constructionmapapp.ca)

BuildForce CanadaTel: 613-569-5552info@buildforce.cawww.buildforce.ca

For further information, contact:

January 2012