TORONTO, Jan. 5 /CNW/ - 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 RBC Economics.
"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 cent).
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, at http://www.rbc.com/economics/market/pdf/sme.pdf.
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