Industry feels impact of job losses

It’s no secret Canada’s in a recession, but just how bad it is came to light on Friday, as Statistics Canada reported that January was the worst month on record for job losses. The impact was felt in Canada’s mutual fund industry, as at least two more firms shed jobs this week.

The Canadian economy shed 129,000 jobs in January, the worst single month for job losses in the history of the Labour Force Survey, points out Michael Gregory, a senior economist with BMO Capital Markets, as the labour force in Canada contracted by 0.8%.

“This marks the third consecutive decline for a cumulative 212,700 lost jobs, which is also a record in level terms and in percentage terms (-1.2%). It is surpassed only by the 1981-82 recession period,” Gregory wrote in a report on Friday.

Canada’s unemployment rate now stands at 7.2%, not as high as in the U.S., where unemployment hit 7.6%, as that country announced the loss of nearly 600,000 jobs. The Canadian number does stand out, though, because Canada’s job losses seemed quite high in proportion to the U.S. this last month.

A good chunk of the job losses could be due to seasonal employment patterns, which usually see a drop-off in January.

“This month’s job loss was paced by the manufacturing sector, which was in turn driven by the automotive industry. Part of this is picking up the broader and longer seasonal shutdowns, but it’s clear that Canada’s trade-dependent sectors are getting pummeled by a deepening U.S. recession,” Gregory says. “Transportation and warehousing paced the modest drop in service sector jobs along with business services, but were partly offset by decent gains in health care, finance and hospitality.”

If there was pick-up in the financial industry, it doesn’t appear to be with mutual fund firms. Both DundeeWealth and Fidelity reportedly eliminated jobs this week.

DundeeWealth confirmed that it cut 60 positions, which is expected to help the company create about $40 million in cost savings for the coming year. The company has reportedly shed 380 jobs in the last year.

DundeeWealth is shedding these workers against a backdrop of strong sales. The company still finished the year among the top of the industry for net-new fund sales.

A similar situation exists at Fidelity Canada, which remains a leader in sales in the industry, but it still initiated job cuts on Tuesday as part of a previously announced wave of layoffs by it’s parent company. The Boston-based parent company announced in November that it was cutting 3,000 jobs, starting with 1,300 that began in November. The other 1,700 were slated to take place in the first quarter of 2009.

Chris Pepper, director of corporate affairs for Fidelity Investments Canada, says the latest round of cuts included workers based in Canada who were employed by the U.S. operation, and some employees directly employed with the Canadian company.

“After an extensive review of our expenses in the wake of the unprecedented events of recent months, Fidelity Investments Canada ULC has decided to implement expense reduction activities that include the separation of some employees,” he says. “At times like these, it is critical to maintain the strong financial status of the company while also ensuring we continue to provide our customers with the best products and services available in the industry.”

Other companies that have publicly announced job reductions are AIC Limited and CI Investments. The latter firm, well known for running an efficient operation, announced cuts of 50 to 60 jobs in November, but half of those were empty positions eliminated through a hiring freeze. Other firms, though, like Invesco Trimark, pointed out that they have not had to cut any jobs due to the market downturn.

In a survey of the investment industry’s top professionals, Chartered Financial Analysts (CFAs) is mixed on whether the recent government intervention will improve the prospects.

A survey of 568 CFAs saw a slight majority (56%) pessimistic about the ability of new measures to improve the functioning of Canada’s capital markets. Two-thirds (66%) of respondents agreed with the government’s decision to purchase $75 billion of insured mortgage pools prior to the budget. Another 54% welcomed the additional $50-billion commitment to the Insured Mortgage Purchase Program (IMPP) for a total of $125 billion.

Interestingly, though, in Ontario, where the industry has been harder hit and more than 70,000 jobs were lost last month, there was a huge disparity in support for more government measures vis-à-vis the western provinces.

More than half (56%) of the 29 respondents in Alberta believed measures in the latest federal budget adequately addressed the problems in the capital markets. Less than half (44%) of the 99 respondents in Ontario felt government action was adequate to tackle the crisis.

“I think that difference talks about the whole ‘have and have not’ in the economy right now. When things are good in the west, things are not good in the east,” says Janine Guenther, presidents’ council representative for the Canadian CFA Institute member societies and regional vice-president for TD Waterhouse, Private Investment Counsel. “I think there is a feeling that Canada as whole is in good shape, because we’re Canadian. We are by nature conservative, we’re not risk takers. We’re not seeing the problems that we see in other parts of the world. You can see how we could be impacted by our biggest trading partner. However, many of the problematic capital structures in other parts of the world [that have caused the crisis] just don’t exist here.”

(02/06/09)