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Canadian Small Businesses Resilient through Recession: RBC Economics
TORONTO, January 5, 2011 — Canadian small-
and medium-sized businesses (SMEs) better weathered the recession
relative to large firms in the private sector, according to
a new report on small businesses and the labour market from
"Countering concerns that smaller enterprises are generally
more impacted by economic downturns, we found that smaller
businesses endured the recent recession better than their
larger counterparts," said Paul Ferley, assistant chief
economist, RBC. "The relative success of private sector
SMEs likely reflected lower exposure to external markets such
as the United States, which saw greater weakness compared
to Canada's domestic economy."
The RBC report focuses on private sector employment numbers,
a key business indicator, and found that private SMEs in Canada
with fewer than 300 employees were better able to cope with
the effects of the recession and have been quicker to recover
than larger private enterprises. In addition, businesses that
depend on the U.S. export market had a more difficult time
than those more focused on the domestic market which was not
hit as hard by the recession.
"During difficult economic times, businesses often
find themselves laying off workers and stalling their hiring
initiatives," said Mike Michell, director, Small Business,
RBC. "However, private sector SMEs appear to have created
business strategies that have ultimately helped them come
out of the downturn relatively unscathed.."
Overall, employment at private SMEs fell 4.2 per cent during
the recession, in contrast to 5.5 per cent among larger private
firms. Compared to large manufacturers, private sector SMEs
seem to have had lower exposure to markets in the United States.
When looking at all firm sizes, private goods-producing industries
- including manufacturing, construction, mining, oil and gas,
logging, forestry and utilities - took the biggest hit to
employment through the recession, declining 11.1 per cent
from a fourth quarter peak in 2007.
Trends in employment numbers at SMEs and large firms were
found in most provinces across the country.
- Newfoundland & Labrador: SME employment in
the region remained strong during the economic downturn.
Though payrolls on average declined by 1.2 per cent, they
have since surpassed previous peak levels. In contrast,
employment at large firms declined more sharply at 4.3 per
cent. Manufacturing bore the brunt of the declines with
total employment falling by 29.2 per cent, accounting for
90 per cent of the overall decline at large firms.
- Nova Scotia: Employment in Nova Scotia was stable
throughout the recession, although employees at large firms
fared better than SMEs as payrolls reduced by 1.7 per cent
and 2.9 per cent respectively. The domestic trade sector
was the main source of weakness among SMEs, accounting for
44 per cent of job losses in this category.
- New Brunswick: Manufacturing was the main source
of job loss in New Brunswick with employment in this sector
falling by 11.3 per cent between the third quarter of 2008
and the second quarter of 2009. Overall, employment among
SMEs contracted 13.2 per cent compared to a drop of 9.6
per cent at large firms.
- Quebec: Employment at large firms in Quebec fell
6.2 per cent, with more than half of the decline coming
from manufacturing, while employment at private SMEs fell
2.6 per cent after peaking at the end of 2008. Transportation
and warehousing sectors experienced general weakness with
employment falling at SMEs and larger firms by 7.3 per cent
and 5.7 per cent respectively.
- Ontario: Job losses in Ontario's manufacturing
sector were responsible for half of the decline in total
private-sector employment from the third quarter of 2008
to the fourth quarter of 2009. Within manufacturing, job
losses were concentrated at large firms where employment
fell by 19.2 per cent during this period, compared to a
decline of 10.4 per cent at SMEs. Weakness was also recorded
in the retail and wholesale-trade sectors where SMEs reduced
payrolls by 4.1 per cent and large firms by 1.3 per cent.
- Manitoba: Employment at Manitoba's private SMEs
held steady throughout the recession as larger firms reduced
payrolls. As seen in other parts of the country, employment
losses in Manitoba were concentrated within manufacturing,
which accounted for the entire 1.5 per cent decline in employment
at SMEs and one-third of the 8.1 per cent reduction in payrolls
at large firms. The bulk of the remainder of large firm
employment weakness was within the retail and wholesale-trade
sectors, where employment fell by 10.8 per cent, but rose
0.5 per cent at SMEs.
- Saskatchewan: While employment at larger firms
plunged by 10.5 per cent, employment at Saskatchewan's private
SMEs increased by 1.8 per cent after initially falling 0.7
per cent. The decreases at large firms were more broadly
based compared to other provinces and were led by declines
in manufacturing (20.4 per cent), transportation and warehousing
(22.3 per cent), and retail and wholesale trade (3.8 per
- Alberta: Private employment at SMEs in the province
dropped 7.4 per cent compared to 5.6 per cent among large
firms. The main driver appears to be in the construction
sector where SME employment fell by 9.0 per cent compared
to a gain of 1.1 per cent at large firms. The employment
rate in the manufacturing sector of large firms fell by
19 per cent, whereas SMEs cut payrolls in the manufacturing
sector by a more moderate 13.1 per cent. Employment at large
firms in the mining, quarrying, and oil and gas extraction
industries fell by 16.2 per cent compared to a decline of
7.7 per cent at SMEs.
- British Columbia: Similar to Alberta, large firms
in British Columbia generally outperformed their SME counterparts.
Though private employment at large firms dropped 7.4 per
cent peak to trough compared to the 6.9 per cent decline
at SMEs, a subsequent rebound at large firms currently leaves
the drop at 5.7 per cent. This was the case across the province
during most of the recession with employment declines at
SMEs generally greater relative to large firms. The greatest
source of weakness for SMEs was in the construction sector,
where payrolls fell by 11.6 per cent compared to an increase
of 1.9 per cent at large firms. Most other sectors within
the province reverted to the national trend of SMEs seeing
less weakness relative to large firms. For example, the
largest source of weakness overall was in the retail and
wholesale trade sectors with employment at SMEs falling
5.1 per cent compared to 8.3 per cent at larger firms. Manufacturing
in the province was also weak with SME employment falling
by 11.4 per cent, although this was outpaced by a 14.3 per
cent decline at large firms.
A complete copy of the report is available as of 8 a.m. ET,
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