The other implication of the rise in the relative price of commodities is economic adjustment, by which I mean the reallocation of labour and capital from weaker sectors to stronger sectors. The manufacturing sector, faced with higher costs for energy and other inputs, new sources of competition from Asia, and a stronger Canadian dollar, is going through a difficult adjustment.
Our own surveys suggest that most manufacturers are responding to these challenges by making changes in the way they do business. Part of this adjustment has involved reducing employment. In the past three years, employment in manufacturing has declined by about 250,000 jobs. At the same time, the primary and service sectors have been expanding capacity and employment in response to strong demand.