Looking Ahead: A Ten-Year Outlook for the Canadian Labour Market, 2004-2013 - October 2004

Average annual growth rates (%)

	1999-03			2004-08			2009-13
	GDP	Empl.	Prod.	GDP	Empl.	Prod.	GDP	Empl.	Prod.
	3.6	2.2	1.4	3.0	1.5	1.5	2.7	0.9	1.8
Goods-producing industries		1.5			1.0			0.9
Agriculture	1.2	-4.5	6.1	1.6	0.5	1.1	2.0	0.3	1.6
Other primary industries	0.7	-0.3	1.1	2.4	0.8	1.6	2.2	0.2	2.0
Logging and forestry	1.4	-1.4	2.8	1.2	-0.3	1.6	0.7	-0.7	1.3
Fishing, hunting and trapping	0.2	-1.3	1.6	0.5	-0.5	0.9	0.9	-0.1	1.0
Mining (except oil and gas)	2.0	-5.5	8.0	4.1	2.4	1.6	1.8	-0.3	2.1
Oil and gas extraction	-0.6	1.6	-2.2	2.1	0.4	1.6	2.7	0.9	1.7
Support activities for mining and oil and gas extraction	4.3	5.8	-1.2	2.9	1.7	1.1	2.8	0.9	1.8
Construction	4.3	4.7	-0.4	1.9	0.5	1.4	1.7	0.7	1.0
Manufacturing	3.4	1.7	1.8	3.1	1.3	1.8	3.1	1.1	1.9
Food products and beverages	1.6	2.7	-1.2	3.0	1.3	1.7	2.3	0.3	2.0
Wood	5.7	4.6	1.0	0.9	-0.1	1.1	1.8	0.5	1.3
Pulp and paper, paper products	2.1	-2.0	4.2	1.9	0.6	1.3	1.9	-0.3	2.2
Printing and publishing	1.8	4.0	-2.0	1.8	-0.2	1.8	0.8	-0.6	1.5
Manufactured and mineral products	3.4	-1.1	4.6	3.0	1.0	1.9	2.3	0.2	2.1
Rubber, plastics and chemicals	6.2	2.6	3.5	2.2	1.0	1.2	2.3	1.1	1.2
Metal fabrication and machinery	4.0	2.6	1.3	3.9	1.8	2.1	2.6	0.6	2.0
Electrical and electronic products	2.4	2.0	0.5	7.1	2.9	3.9	8.7	5.4	3.1
Motor vehicles, trailers and parts	3.2	4.5	-1.2	1.7	0.8	0.9	2.1	0.9	1.2
Other transportation equipment	4.3	-2.0	6.4	6.0	2.7	3.2	3.9	1.6	2.3
Other manufacturing	1.4	-1.0	2.4	3.3	1.8	1.5	3.1	1.4	1.7
Utilities	-0.2	2.6	-2.7	2.9	0.4	2.5	2.7	0.1	2.6
Services		2.4			1.7			0.9
Commercial services	4.4	2.4	2.0	3.3	1.4	1.8	2.9	0.9	1.9
Wholesale trade	5.9	4.4	1.4	3.7	1.7	1.9	3.1	0.4	2.7
Retail trade	4.5	2.2	2.3	3.3	1.4	1.8	2.6	0.5	2.1
Transportation and storage	2.2	1.4	0.9	2.8	2.1	0.7	2.6	1.7	0.8
Finance, insurance and real estate	4.5	1.8	2.6	3.0	0.5	2.5	2.5	0.1	2.4
Professional business services	2.3	2.6	-0.2	3.8	1.8	1.9	3.7	1.6	2.0
Computer system design services	13.8	6.9	6.5	5.3	2.8	2.4	5.3	2.9	2.3
Other professional services	6.1	1.7	4.3	3.8	2.4	1.3	3.7	2.5	1.1
Management, administrative and other support	6.3	5.0	1.3	3.2	1.5	1.7	3.0	0.9	2.0
Information, culture and recreation	6.6	2.7	3.8	2.8	1.1	1.7	2.6	0.5	2.1
Accommodation, food and recreation	1.8	2.1	-0.3	4.4	1.7	2.7	3.1	1.1	2.0
Other services	3.9	-0.1	4.0	3.0	0.8	2.2	2.6	0.5	2.1
Non-commercial services	2.3	3.0	-0.6	3.4	2.7	0.7	2.7	1.1	1.5
Educational services	1.4	2.4	-1.0	2.1	1.4	0.6	1.5	0.6	0.9
Health services	3.1	3.4	-0.3	4.4	3.4	0.9	3.5	1.5	2.0
Public administration	2.8	0.9	2.0	2.3	1.3	0.9	2.2	0.7	1.5
Source: HRSDC-PRCD, Labour Market and Skills Forecasting and Analysis Unit, Reference Scenario 2004

Several factors will have an impact on the employment outlook by industry; they include:

• the move towards a knowledge-based economy;
• the demographic outlook;
• the fiscal outlook of governments;
• supply constraints for some natural resources (e.g. allowable cuts in forestry, declining oil and gas reserves).

The knowledge-based economy improves prospects for business services

The computer systems design and services industry has matured and, as a result, the double-digit growth rates recorded in the second half of the 1990s have definitely come to an end. Nevertheless, this sector is expected to grow at an average annual rate of 5.3% over the 2004-08 period, given that computer technology has become such an integral part of the economy. Not surprisingly, the slowdown in activity in the computer systems sector has resulted in a much lower demand for labour. Employment is expected to increase at an average annual rate of 2.8% between 2004 and 2008 compared with a growth of 20.5% over the 1994-99 period. Employment growth is also expected to weaken due to the trend towards the off-shoring of computer services to India and China. However, despite slower growth, the computer systems industry is expected to lead all service-producing industries in terms of output growth (and to be second in employment growth).

Professional business services (a group that includes legal, accounting, architectural and engineering services) and other professional services (which include scientific, technical and advertising services) experienced strong growth during the second half of the 1990s, taking advantage of the growing trend among companies towards outsourcing non-essential processes in order to increase operational efficiency, and of the move towards the knowledge-based economy. In 2002 and 2003, however, these two groups had some difficulties as a result of lower corporate profits and a decrease in non-residential construction. Over the projection period, the demand for these services is expected to increase, benefiting from a recovery in corporate profits and non-residential investment. The estimated annual average GDP growth in these two sectors over the next five years is 3.8%. Despite significant productivity gains over the period, employment is projected to experience robust annual average growth in the order of 1.8% for professional business services and 2.4% for other professional services.

The information, culture and recreation sector (which includes wireless and satellite telecommunications services, broadcasting, Internet and cable) has slowed down considerably. In the mid-1990s, many of these services were just starting up and they swept the market with incredible speed. Since 2002, however, a number of services in this group have begun to mature, while others were hit hard when the technology bubble burst. As a consequence, employment declined in 2002 and 2003. As some of the sub-sectors mature and others recover, the rate of GDP growth in the industry (2.8%) is projected to be close to that of the overall economy (3.0%) over the 2004-08 period. However, many technological changes in the information, culture and recreation sector will favour productivity gains over employment, which should limit job growth to 1.1% annually.

The robust growth in the finance, insurance, real estate and leasing sector in both 2002 and 2003 is attributable to the hot real estate market. Even though output is expected to grow near the average rate over the next five years, growth will be slower than over the last five years, as growth in real estate and mortgage lending is expected to slow down. On the other hand, increases in wealth and capital assets will benefit this sector. Job levels in the industry are expected to record a weak growth (0.5% a year) over the 2004-08 period, because technology — including automatic bank machines and house listings on the Internet — will reduce the need for labour.

Demographics and the fiscal outlook will affect jobs in government and social services

Throughout much of the 1990s, growth in the health care and social assistance sector was minimal as governments in Canada cut back significantly on health care spending in order to bring deficits under control. The emergence of surpluses in the late 1990s resulted in greater spending on health care, leading to a sharp increase in activity in this sector. As a consequence, the health care and social assistance sector has been a major driver of employment growth in the service-producing sector over the past two years. According to the Canadian Institute for Health Information, health care spending is estimated to have risen by 7% in 2002 and 7.1% in 2003. This increase helped propel employment in the sector by 4.2% in 2002 and 4.8% in 2003. Since the beginning of 2000, the number of jobs has gone up by 240,000 — an increase of almost 17%. In addition to the improved budgetary situation of the provinces and the federal government, the growth in health occupations can also be explained by greater pressure on the health system from an aging population that requires more and more care and from a growing shortage of health care workers (insufficient labour supply and increased retirements). This situation is projected to continue over the next few years. Thus growth at rates significantly higher than the national averages is anticipated for production (4.4%) and employment (3.4%) during the 2004-08 period. This solid projection reflects the commitment made by both levels of government to improve Canada's health care system. Beyond 2006, real growth should gradually decline but will remain above Canada-wide averages because of the funding required to meet the needs of a rapidly aging population. New technologies being introduced into the health care system will eventually enable care to be provided to Canadians with fewer employees.

After job losses in 2000 and anaemic growth in 2001, labour market conditions improved significantly in the education sector in 2002 and 2003, with healthy employment increases of 5.1% and 3.4%, respectively. The better financial situation of governments, the underfunding of the education sector in previous years and the arrival of Ontario's double cohort led to a significant increase in investment in the education system. Activity in education is generally tied to Canada's demographic profile and fiscal policy. As a result, real output in this sector is expected to gradually slow down over the forecast period as Canada's population ages. Specifically, as the "echo-boom" generation leaves the 0-24 cohort, the share of the population in that age group will decline significantly. After expanding at growth rates above 2% in the 2004-05 period, growth is projected to average only 1.5% in the 2006-13 period. Employment in the education sector is expected to grow at 1.4% a year, which is slightly below the average for all industries over the 2004-08 period. The need for fewer teachers will result in slow growth in employment in the latter years of the forecast period.

The outlook for public administration is closely linked to the federal government's fiscal situation. In the 1990s, real output either declined or recorded minimal gains as the federal government grappled with huge deficits. Employment declined for seven consecutive years between 1994 and 2000. Once Canada's fiscal situation was brought under control, governments resumed hiring and real output rebounded. The number of employees in public administration increased by 4.7% in 2003, after growth of 1.6% in 2002 and 0.6% in 2001. It is mainly in the federal administration that new hiring took place during this period. In 2004-05, real output should expand at an annual pace of close to 3% per year. Real growth is expected to remain close to or above the 2% level for the remainder of the forecast period. It is assumed that Canada will run small surpluses and, as a result, there should not be a need for severe cutbacks in government services over the long term. Over the 2004-08 period, employment in public administration should increase at an annual average rate of 1.3%.

Employment in consumer-based goods and services will follow the trend in the overall economy

Over the past two years, the trade sector has recorded employment growth below the average for the economy. That slower growth can be explained by movement in opposite directions in the two sub-sectors — retail and wholesale — in 2002 and 2003. The strong employment growth in retail trade recorded in 2002, sustained by a buoyant economy, was partly offset by stagnant growth in wholesale, especially in sales of machinery and equipment, which were down because of a lack of business investment. The opposite happened in 2003: retail trade suffered from the effects of severe acute respiratory syndrome (SARS) and from a slowdown in economic growth, while wholesale trade was pushed along by a strong rebound in investment in machinery and equipment. Both sub-sectors are expected to record good performances over the next five years in terms of output, with average annual increases in GDP of 3.3% and 3.7%, respectively. This positive outlook is mainly the result of solid growth in real disposable income — which is projected to advance at an average annual rate of 2.8% over the forecast period — and of relatively strong growth in overall employment. As a result, households will have discretionary income to spend at both wholesale and retail outlets. However, productivity gains over the same period are projected to result in slower average annual growth in retail (1.4%) and wholesale (1.7%) employment. Some weakening will occur in the outer years of the forecast horizon (2009-13) as Internet shopping increases in popularity. Over the 2009-13 period, employment is expected to grow by 0.5% and 0.4%, respectively, for retail and wholesale trade. Over the long term, the aging of Canada's population will also have a negative effect on the trade sector, as older people will spend more on health care services at the expense of consumer goods.

Despite the strength of the Canadian economy and high automobile sales, the transportation and warehousing industry recorded a decline in employment in 2002, attributable mainly to the weakness of the U.S. economy and to the financial troubles faced by the airlines. The renewed confidence in airline travel in 2003 enabled employment to partly get over the problems caused by the attacks of September 11, 2001, although progress was stalled by weak exports of goods to the United States due to the appreciation of the Canadian currency and to the sluggishness of the U.S. economy in the first half of 2003. Over the next few years, the strong growth expected in the U.S. economy should stimulate Canadian exports to that country and thus improve growth in the transportation and warehousing industry. The demand for labour should remain high over the forecast period (2004 to 2008), with an annual average growth of 2.1%.

The performance of the accommodation and food services industry, which recorded relatively sound growth in 2002, was affected by various negative events in the Canadian economy in 2003, including SARS and the appreciation of the Canadian dollar. Employment did rise in 2003, however, although less rapidly than in 2002. The effects of SARS disappeared quickly, however, and tourism has taken off again in 2004. Canada remains an affordable tourist destination, despite the higher Canadian dollar. Rising real disposable income and the aging population are also expected to contribute to increased consumption of accommodation and food services. The GDP should grow at a faster pace than average (4.4% a year) from 2004 to 2008, but significantly higher productivity should keep employment growth at an average rate of about 1.7% a year.

Manufacturing employment is expected to be strong, but job creation will be tempered in construction and utilities

Over the past two years, the housing boom has been the driving force behind the employment gains observed in the construction industry. Investment in the residential sector soared in 2002, whereas the non-residential sector recorded a drop in investment. The net result for the industry was an increase in employment of 4.6% (39,000 additional jobs). Under the impetus of the residential sector, construction continued its strong expansion in 2003, adding 49,000 jobs (5.6%). Not only was there an increase in housing starts, but the renovation sector also picked up, spurred on by the strong resale market and by the aging of units built during the boom of the late 1980s. The housing boom also had a major spinoff effect on employment in the manufacture and retailing of furniture, the retailing of construction material, real estate and banking (mortgage market). Unlike in 2002, however, growth in the construction industry in 2003 was not limited to the residential sector, as growth in the non-residential sector resumed.

The strength in Canada's residential construction sector will continue in 2004. Beyond that, however, real output is projected to slow down significantly, reflecting much weaker activity in the housing market. In the short term, higher interest rates and a lack of pent-up demand will negatively affect housing activity. Over the long term, the aging of Canada's population is projected to constrain housing activity as the number of people in the age group likely to buy a first home drops. Residential renovation could, however, make up for some of the decline in housing starts. In addition, non-residential construction in the energy sector will also give a boost to the industry thanks to major electricity and oil and gas projects. However, activity in non-residential construction outside the energy sector will restrain growth in real output, especially in the short term. In an environment characterized by poor profits and by consolidations undertaken in the wake of mergers and acquisitions, the demand for office space in key centres has been well below the supply in the last few years, despite the conservative level of building activity. As a result, vacancy rates have increased across Canada. Moreover, lower capacity utilization and significant increases in business inventories suggest that a good deal of excess supply has yet to be absorbed before a recovery can begin. Overall, employment in the construction industry is expected to grow by an annual average rate of 0.5% from 2004 to 2008.

Output in the utilities sector is linked to industrial production in Canada. When the economy slumped in 2001 and again in 2003, real output in the utilities sector declined. As we anticipate strong growth in industrial production over the forecast period, GDP growth in utilitiesis expected to be similar to the overall average. The increase will also be in response to higher energy demand in Canada and the United States and to the obsolescence of some existing facilities in the energy sector and in municipal services (water and sewer). The outlook for the utilities sector will also benefit from the decision by a number of Canadian provinces to deregulate their electricity markets and to export electricity to the United States. However, because this is a capital-intensive sector in which new technologies have a significant impact on productivity, the demand for new labour over the next five years is expected to be very low and employment should increase only by 0.4% a year.

The year 2002 was very good for manufacturing industries, with employment jumping by 2.3% (51,000 more jobs). In 2003, the appreciation of the Canadian dollar, the beef embargo and relatively slow growth in the United States early in the year prevented the manufacturing sector from sustaining that trend. In fact, employment shrank by 32,000 (-1.4%) in 2003. Several sub-sectors of the Canadian manufacturing industry suffered setbacks that year. First, the beef embargo led to a drop in production in the beverage and food products industry. Then, the decline in exports caused by the appreciation of the Canadian dollar and weak American demand early in the year hurt exporting industries such as metal and machinery products, automobiles and parts, and computers and electronic equipment. Over the forecast period, growth in manufacturing production and employment is projected to be similar to the economy-wide average, with GDP increasing by 3.1% and employment by 1.3% over the 2004-08 period. However, the situation will vary considerably from one industry to another. As far as employment is concerned, the annual average growth should be robust in the manufacture of computer and electronic products (2.9%), other transportation equipment (2.7%) and metal products and machinery (1.8%), but is expected to be relatively weak in auto parts (0.8%), pulp and paper (0.6%), wood product manufacturing (-0.1%) and printing (-0.2%). Employment in the food and beverage industry is projected to grow by 1.3% a year over the period.

• In the computer and electronic products sector, manufacturers are still trying to muddle through after the collapse in the world market of telecommunication equipment in 2001. In 2003, suppliers of telecommunication services continued to cut their capital budgets because of their persistent financial weakness and excess capacity. Since the end of 2000, GDP in the computer equipment and electronic products sector has tumbled, losing more than half its value. The decline has started to slow down and is nowhere near the free fall seen in 2001 and 2002, when GDP dropped by 23.3% and 11.5%, respectively. Employment growth followed basically the same path as production but in a less dramatic way. After growing by nearly 50% in the second half of the 1990s, employment has dropped by almost 20% since 2000. However, the computer and electronic productssector seems to have pulled itself out of the collapse of demand for computer and telecommunication equipment. A stronger economy in the United States and Canada and an increase in corporate profits should push up capital expenditures beginning in 2004, preparing the way for renewed demand for telecommunication equipment, computers and other electronic products. The recovery of expenditures on hardware and software in the United States and Canada is also the result of equipment obsolescence following three years of underinvestment after 2000. Excess capacity in the telecommunications industry will continue to have a negative impact, even though it is diminishing and is expected to gradually disappear over the next few years. Continued growth in wireless services and the start of a migration towards IP-based telecommunications systems — the newest trend in the industry —should stimulate telecommunications equipment sales. As a result, although growth will not reach the heights of the 1990s, the computer and electronic products industry should show the strongest annual average increases in both GDP (7.1%) and employment (2.9%) over the next five years, compared with other sectors.
• The fabricated metal and machinery products sector has generally experienced strong growth over the past decade, reflecting the fact that fabricated metal is an integral component of industrial production. In 2003, however, real output in this sector declined by 2.5%, a result of weakness in U.S. manufacturing, where much of its output is destined. Employment in the sector reflected the evolution of output, remaining stable in 2002 and declining in 2003. Over the coming years, the fabricated metals and machinery products sector should experience solid growth, as investments in machinery and equipment increase thanks to strong U.S. economic growth and a better performance of corporate profits. This should stimulate the export of Canadian metal products and machinery and increase employment in this sector by 1.8%.
• The other transportation equipment group includes aerospace products and parts manufacturing, rail cars and engines, ship and boat building, and other minor categories. Aerospace products and parts manufacturing dominates, with roughly three quarters of the sector's value-added output being attributable to this category. Thus, over the past few years, the manufacture of other transportation equipment has been significantly affected by the events faced by the airline industry. In particular, orders for new aircrafts dwindled after the September 2001 attacks, leading to significant declines in output and employment in the aerospace manufacturing industry over the 2002 to 2004 period. The situation seems to be improving, however, and the order books of aerospace firms have begun to fill up again. A stronger U.S. economy, renewed confidence in airline travel and a more stable exchange rate should help to bolster the demand for Canadian aerospace production. In addition, the steady decline witnessed in ship and boat building since the 1990s has ended; although growth in shipbuilding will remain muted, at least it will no longer be a drag on the overall sector in the future. Finally, changing demographics, increased road congestion and environmental concerns should help to sustain the demand for automated transit systems, including rail. Overall, a strong rebound is expected in other transportation equipment manufacturing in 2005 and 2006, boosting real GDP growth to an average of 6.0% over the 2004-08 period; the rate is expected to ease to a 3.9% trend between 2009 and 2013. Employment in this sector is expected to grow by 2.7% per year over the 2004-08 period.
• Although the end of the year was not positive for the motor vehicle and parts sector, 2002 was a very good year overall, as sales were stimulated by low interest rates and by additional rebates offered by some car producers. However, a drop in sales in the United States in the last quarter of 2002 led to an increase in inventory, which in turn caused slowdowns or stoppages on some assembly lines. Total sales of new vehicles in Canada and the United States continued to decline in 2003. This can be explained in part by the fact that the number of new vehicles purchased in North America had been far higher than "normal" for several years. The market is therefore saturated, and the effectiveness of dealers' incentives is dwindling. The coming years are expected to be more difficult for the Canadian automobile industry, especially in terms of job growth. This gloomy outlook is mainly attributable to excess world capacity in the automobile sector and to a shrinking of the market share held by the Big Three (Ford, General Motors and Daimler-Chrysler are the major employers in the Canadian automobile sector). The increase in production for the years 2004 to 2008 is projected to be below the economy-wide average at 1.7% a year. Moreover, Canadian plants are making investments aimed at maintaining their competitiveness by increasing productivity. As a result, job growth in the industry is expected to be below the average at 0.8% a year. The long-term employment outlook is even less optimistic, in light of demographic changes, slower export growth to the United States caused by strong foreign competition (especially from Mexico, Brazil and China) and greater investment in labour-saving technologies.
• Food and beverage production has taken off over the last few years. In the 1997-2002 period, production grew at an annual rate of more than 3%. In 2003, however, production declined, affected by poor sales on foreign markets. Exports suffered from the appreciation of the Canadian dollar, weak economic activity in North America and the restrictions imposed by our main trading partners on the import of Canadian beef. The appreciation of the Canadian dollar also encouraged foreign competition on the domestic market. Inventories have increased as a result of the lower demand, especially among beverage producers. In 2004, the end of the impact of the BSE crisis will result in a rebound in real output. Over the forecast period, the sector is projected to record average growth as it successfully transforms itself into an internationally competitive force in the world economy. However, greater productivity will mean that job growth will not keep pace with the increase in production. Over the 2004-08 period, average annual growth in GDP is projected to be 3.0%, whereas employment is expected to grow by 1.3%.
• The wood products industry registered strong growth over the past five years, with average annual increases of 5.7% for GDP and 4.6% for employment. This dynamic performance reflects the strength of residential construction and greater access to foreign markets. In addition, the financial losses due to the countervailing duties imposed by United States against Canadian softwood were partially compensated by an increase in the production of wood products. However, the outlook for the wood productsindustry calls for a deterioration of the situation. The U.S. duties, the anticipated slump in the housing starts in Canada and across the border, and the decline in the supply of lumber will have a negative impact on the industry in the short term. The aging of the population and the subsequent decline in the demand for housing will have a significant downward impact on the demand for wood products over the long term. The development of new products made of plastic and steel to replace wood products and fibreboard made with straw will also impact this sector. The number of jobs is expected to decrease marginally (at an annual rate of -0.1%) in the wood products industry over the 2004-08 period.
• The outlook in the pulp and paper and printing industries is similar to that of the woods products industry. The number of jobs is expected to increase slightly in the pulp and paper industry (at an annual rate of 0.6%) and to decrease in printing (-0.2%). Production should be up slightly over the next five years compared with the last five years, but there will be no significant need for additional labour. General weakness in demand and a drop in advertising will have a negative impact on pulp and paper and printing over the short term. The growing use of e-mail and CD-ROMs is expected to reduce the demand for paper and printing, and to restrict production and employment growth over the long term. Greater use of electronic media will also mean lower demand for magazines and newspapers.

Employment growth should be slow in occupations unique to the primary sector, except in the mining industry

Employment in the agriculture sector in Canada has suffered from a number of factors over the 2000-02 period: low prices for wheat on the world market, a severe drought in western Canada, the embargo on Canadian beef by a number of countries including the United States, and the increasing use of labour-saving technology. As a result, employment declined by about 20% over the period. The agriculture sector rebounded in 2003, with real output soaring by 21.1% and employment rising by 3.0%. In 2004-05, however, growth in real output is expected to average less than 1% per year. Not only does this declining growth reflect a natural slowdown from the surge experienced last year, but the cattle industry will continue to be affected by the fact that trade in live cattle and beef will not resume fully in the short term. After 2005, growth should rebound somewhat but it will remain below the rates achieved in most other sectors of the Canadian economy. While the cattle industry is expected to recover, the overall agriculture sector will continue to be negatively affected by the ongoing subsidy war between Europe and the United States, which has led to low prices for many grains. Employment in this sector is projected to increase at an average annual rate of only 0.5% over the 2004-08 period. Sluggish growth in output will restrain employment growth, as will the solid growth in productivity, a result of ongoing investment in labour-saving technology by farmers.

Real output in the fishing sector is expected to increase slightly over the forecast period. The fishing industry is reeling from a cut of more than 20% in the total allowable catch for crab. It is also grappling with the closure of the East Coast cod fishery and decreased lobster findings, both resulting from declining stocks. However, the crab fisheries are expected to recover somewhat in the short term. Over the long term, real output will continue to be adversely affected by supply constraints. Any increases in output will come from productivity increases as opposed to gains in labour activity. In fact, employment is expected to record absolute declines over the 2004-08 period (annual average of -0.5%), but at a lesser pace that those recorded in 1999-2003 (average annual decrease of 1.3%).

The countervailing duties imposed by the United States on Canadian softwood lumber in 2002 seriously undermined growth in the forestry sector. The negative effects of the dispute continued in 2003, but the strong growth in residential construction offset the losses associated with the softwood lumber conflict, leading to production and employment gains in 2003. Housing starts are expected to start dropping off gradually in 2004-05, bringing down the demand for lumber. Moreover, the financial constraints imposed on Canadian lumber companies by the United States will continue to hold back profits and jobs in the forestry sector. In addition to the expected drop in demand over the next few years, environmental issues and Native land claims will limit the availability of this resource. The outlook for the Canadian forestindustry is therefore not especially bright, and the industry is expected to have one of the lowest GDP growth rates of all Canadian industries from 2004 to 2008; employment is expected to decline (annual average of -0.3%). In fact, all gains in output will occur as a result of productivity increases rather than increased labour activity.

The mining sector (excluding oil and gas) lost jobs over the last five years because of higher productivity and falling prices for certain raw materials, which in turn led to less exploration. Higher prices for raw materials over the next few years, along with renewed economic growth in the United States, will help mineral exploration and mining in Canada. The recent development of the diamond sector in the North will continue to help boost production and jobs in mining. The Canadian mining sector will also receive a lift from the Voisey's Bay nickel-copper-cobalt deposit. The construction of the open-pit mine and mill/concentrator processing plant at the site in Newfoundland and Labrador is now well under way, and the production of concentrate is expected to begin in 2006-07. Mining GDP is expected to grow by 4.1% annually over the 2004-08 period. However, greater competition from Australia and some South American countries will limit employment growth. Employment should grow on average by 2.4% over the next five years, which is higher than the projected national average.

Although the GDP of the oil and gas industry rose in 2002, increased productivity led to a reduction in employment. More specifically, declines in drilling and in the price of natural gas led to a drop in employment among suppliers of oil and gas services. However, oil and gas prices rose in 2003, boosting extraction and exploration activities. Real output in the oil and gas extraction industryis forecast to increase by close to 3% in 2004 and 1.6% in 2005. This growth is quite modest, given the soaring prices for both natural gas and oil. Natural gas producers in Alberta and British Columbia are taking advantage of sky-high commodity prices and are drilling record numbers of new wells. However, total oil production will continue to fall in the short term even as the price of crude oil remains at historically high levels. Most analysts blame thinning resources from the Western Canada Sedimentary Basin Oil (WCSB) for the fact that production has failed to benefit from the high prices. Lower production at both Hibernia and Terra Nova will also reduce real output. While Hibernia and Terra Nova received permission to raise daily production limits, neither project has managed to meet the new levels and the targets are unlikely to be reached without further drilling. When additional production comes on board in 2006, real output is expected to grow by 3.2%. Beyond 2006, however, real output will be weaker, reflecting the fact that reserves are diminishing in the WCSB. While ongoing increases in production at the tar sands will ensure that real growth will remain above 2.5% per year over the long term, there will not be a return to the 5%-to-8% growth performance recorded in the first half of the 1990s. As in the mining sector, technological change will ensure that most of the increase in output over the forecast period will come from gains in productivity rather than increases in employment. Employment growth is expected to average only 0.4% per year over the 2004-08 period.