Service sector key to Canada's economic growth, Bank of Canada governor says
Focus on service sector will help in the recovery from reduced commodity prices, Stephen Poloz says
Bank of Canada governor Stephen Poloz says the service sector is key for growth as the Canadian economy continues to recover from the global financial crisis and the more recent downturn in oil and other commodity prices.
Speaking to the C.D. Howe Institute in Toronto, Poloz said Monday night that there will always be demand for Canadian resources, but it is the service sector that is growing.
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"Since the onset of the global financial crisis, growth in Canada's service sector has been stronger on average than in the goods sector," he said according to a prepared text.
"Most of the employment growth seen in Canada since late 2014 has been in service industries that pay above-average wages, helping to support national income."
The Canadian economy has struggled since the financial crisis in 2008-09 and the more recent downturn in commodity prices. However, while growth in the goods producing sector has slowed, the service sector has continued to expand steadily.
More than 80 per cent of working Canadians are employed in services, while less than 20 per cent produce goods.
Poloz noted that the loss in export capacity before and after the financial crisis combined with the recent drop in resource prices created an $80-billion to $90-billion hole in the Canadian economy.
Replacements for economic losses
"It is natural to wonder: What will replace the economic losses due to these shocks?" he said.
Poloz said that since January 2001 about 30 jobs have been created in the service sector for every job lost in the goods producing sector. He dismissed the notion that service jobs are generally low-skill and low-paying.
He added that while the average wage in the service sector is lower than in the goods producing sector, wages vary depending on the industry within the sector.
"It probably will not surprise you that the average wage in the finance and insurance industry is higher than that in manufacturing. But so is the average wage in the transportation and warehousing industry," he said. "And, together, those two industries employ more Canadians and produce more output than all of Canada's manufacturers."
Statistics Canada is set to release the results for economic growth for the third quarter on Wednesday.
Economists expect the report to show the economy grew at an annualized pace of 3.4 per cent in the third quarter, according to Thomson Reuters.
The result would follow a contraction in the second quarter due in large part to the forest fires in Alberta that forced the evacuation of Fort McMurray, Alta., and the shutdown of production in the oilsands.