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Employment

August 2012 SEPH: Problem with the ‘unclassified business’ job boom? ‘Unclassified business’ hours and payrolls don’t count

The July 2012 Survey of Employment Payroll and Hours (SEPH) release today highlighted the fact that “on a year-over-year basis, earnings increased 3.6%”.  Almost the entire release (about 4/5 of the analysis) was dedicated to highlighting this bit of good news.  What readers may have missed in the “Note to readers” at the end of the release is the following:

Average weekly hours data are for hourly and salaried employees only and exclude businesses that could not be classified to a North American Industry Classification System (NAICS) code.

Industries (NAICS)

August 2007

August 2008

August 2009

August 2010

August 2011

August 2012

All, incl. unclassified

14,498,703

14,781,419

14,357,286

14,595,832

14,854,964

15,180,260

All, excl. unclassified

14,348,433

14,585,616

14,099,639

14,240,021

14,444,580

14,751,720

 Goods producing

3,016,569

2,980,983

2,673,682

2,726,525

2,783,228

2,862,710

 Service producing

11,331,864

11,604,633

11,425,957

11,513,496

11,661,352

11,889,010

 Unclassified businesses

150,270

195,803

257,647

355,811

410,384

428,540

Source: CANSIM Table 281-0023 Employment (SEPH), unadjusted for seasonal variation, by type of employee for selected industries classified using the North American Industry Classification System (NAICS) monthly (persons), Statistics Canada

As noted last month, ‘Unclassified businesses’ continue to lead the way in payroll job creation, accounting for 41% of net job creation over the last five years (August 2007 to 2012): 154 thousand jobs were lost in Goods-producing sectors as 557 thousand jobs in Services-producing sectors and 278 thousand jobs in ‘Unclassified businesses’ were created.  For context, Goods producers accounted for 18.9% of all payroll jobs in 2012, Services producers accounted for 78.3 %  while ‘Unclassified businesses’ accounted for only 2.8% of all payroll jobs – troubling given the great proportion of payroll job creation this tiny segment of ‘Unclassified businesses’ accounted for.

The brief bit in today’s SEPH release dedicated to highlighting payroll job creation noted the various Goods and Services-producing sectors in which  payroll gains were realised, without mentioning the increase in ‘Unclassified business’ payrolls.  Year-over-year (August 2011 to 2012)  Goods producers’ payrolls increased 2.9 %, Services producers’ payrolls increased 2.0% while ‘Unclassified businesses’ payrolls increased 4.4%.

Some information on the number and size of these ‘Unclassified businesses’ would be useful. Unfortunately, the publicly available data from the Business Register  and the SEPH only provide this information for classified businesses.

Nor is an adequate explanation provided as to why/how these businesses are/remain unclassified:

Unclassified businesses (00) are business for which the industrial classification (North American Industry Classification System (NAICS) 2007) has yet to be determined.

Notably the classification system used in the referenced SEPH table is NAICS 2007. This precludes the possibility that out-of-date classifications are responsible for the increasing ‘Unclassified businesses’ payroll figures.

It seems the lack of information on ‘Unclassified businesses’ in SEPH closely mirrors the lack of information on the ‘Self-employed’ in the LFS. Yet Canadians over the last month have been told that their labour market is ‘booming’ as a result of rather questionable job creation from these same two sources. The media simply regurgitated the Statscan release without any critical analysis:

Fresh data confirms strong jobs growth, points to weekly payroll gains

Julian Beltrame, The Canadian Press Thursday, Oct. 25, 2012

To summarise: This month’s SEPH report indicated strong increase in year-over-year payroll earnings, without counting ‘Unclassified businesses’ payrolls. ‘Unclassified business’ payrolls increased by the greatest proportion over the past year and accounted for more than a third of all payroll job growth over the last 5 years. Yet no information is provided about the nature of these ‘Unclassified businesses’, nor why/how they’ve quickly come to account for so much of Canada’s payroll job growth. Perhaps more troubling is that no one’s seen fit to ask about it.

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