Pulse Check on Ottawa’s High Tech: Part 2 – Employment Trends in the Knowledge Intensive Industry

 

Employment data are a widely used for tracking economic change in industries and communities. Employment is especially important to communities where companies are located because job growth means new opportunities to earn income for younger workers and new immigrants / in-migrants or for existing workers looking for more rewarding jobs. Sustained investment in capital such as new office buildings or technology typically reflects a more resilient  and healthy local economy.

In this post, I will compare employment trends in the Professional, Scientific and Technical (PST) services sector between Ottawa and other selected metropolitan areas. As I noted in my previous introduction blog, Statistics Canada does provide employment data for the Information and Communications Technology (ICT) sector but only for fee based special tabulations. Statistics Canada’s ICT sector includes both manufacturing (e.g. communications equipment, semi-conductor and other electronic components, computer and peripheral equipment) and service industries such as software publishers, data processing, computer systems design and telecommunications carriers. 

The PST industry group only has one sub-sector included in the ICT definition – Computer Systems Design and Related Services (North American Industry Classification System 5415). However, the PST services industry is often viewed as having information intensive economic activities considered to be critical to supporting innovation and dissemination of knowledge and are key elements of Michael Porter’s cluster dynamics including innovation and new business formation. Other industry sub-sectors in the PST services include Legal Services (NAICS 5411), Architectural, Engineering and Related Services (NAICS 5413), Management, Scientific and Technical Consulting Services (NAICS 5416) and Scientific Research and Development Services (NAICS 5417).

It is also useful to point out at the outset that the trends analysis provided below is based on Statistics Canada’s monthly labour force survey which has a few limitations. Firstly, the survey is based on a relatively small population sample which may result in noticeable swings in month to month data which may be more due to the sampling methodology than economic events. Statistics Canada publishes 3-month moving averages instead of absolute monthly data in an attempt to smooth out or filter out such large monthly fluctuations. The labour force data for industry groups are also not seasonally adjusted.

Secondly, the labour force data are collected from surveys of population or households and not of companies or business establishments. Stated differently, labour force numbers correspond to “place of residence” as opposed to “place of work”. This is less of a data issue when examining labour force at the census metropolitan area (CMA) since such geographic boundaries are supposed to represent the labour force catchment area of a major urban centre.

The following table compares employment growth indicators for the PST services industry between Ottawa and other selected CMAs in Canada over the 2000-2013 time period. All the yearly data are annual averages.

PST Employment Table

The table shows that the larger cities in Canada generally have a larger share of their total employment PST industries indicating that such specialized knowledge-intensive business services tend to exhibit stronger clustering tendencies in metropolitan areas. Ottawa-Gatineau and in particular the Ottawa portion of the CMA together with Calgary show the highest percentage of total employment in the PST sector in both 2000 and 2013. The strong growth of the PST sector in Ottawa reflects the federal government’s demand for these higher-order specialized services as well as the presence of a relatively large high-tech sector. Calgary’s strong growth performance in PST is closely tied to the booming oil and gas industry in Western Canada which has provided new knowledge platforms in applications such as imaging technology in geophysical sciences, software, global information systems and communications (Conference Board of Canada).

The largest concentration of PST jobs is found in Canada’s biggest city, Toronto, where the metropolitan area accounted for almost 25% of all jobs in this industry nationally.  The emergence of Kitchener-Waterloo-Cambridge as a new high-tech growth centre is also reflected by that city’s strong growth in PST jobs since 2000.

The following is a graph illustrating how employment in PST has trended since 2000 for selected CMAs. The employment numbers are taken from Statistics Canada’s labour force survey using quarterly data for each year including Q1 in 2014. I normalized the data for the metropolitan areas by converting the quarterly employment numbers into indices by setting the annual average for 2000 equal to 100 and then calculating the ratio between each quarterly observation and the 2000 base year.

PST Chart

With the exception of Kitchener-Waterloo, employment trends were generally similar between the selected CMAs since 2000. Ottawa’s PST sector did display greater fluctuations with significant declines in jobs experienced during 2003-04 following the Nortel collapse and the 2001 Internet bubble bust but over the long run, the sector’s performance was comparable to the other CMAs.

In the case of Kitchener-Waterloo, employment in PST experienced wide fluctuations which was partly due to the smaller job base. Employment growth was especially strong in the post-2011 years despite the large decline over 2012 when Blackberry declined precipitously in terms of its share in the smartphone market.

Calgary also displayed strong job growth in the PST sector having the second highest growth rate after Kitchener-Waterloo. Ottawa’s performance generally lagged behind Calgary but made up significant ground after about 2011.

In conclusion, employment trends in the Professional, Scientific and Technical services industry do not show long term deterioration in Ottawa’s competitive position as a high-tech growth centre. The metropolitan economy still displays a relatively high degree of specialization in this sector and has maintained sustained long term growth. Cities like Kitchener-Waterloo and Calgary have also shown strong positive growth. Their growth is more reflective of their particular regional strengths and not of any displacement of Ottawa’s strength as a high-tech centre.

 

 

 

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