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This article investigates the effect of external, national, and sectoral shocks on Canadian employment fluctuations at the national, industrial, and provincial levels. We assume that employment growth in each industry-province pair depends on U.S. growth, lagged Canadian growth at the national, industrial, and provincial levels, an aggregate shock, and shocks specific to each industry, province, and industry-province pair. We estimate that the U.s. and Canadian shocks account for two-thirds and a quarter, respectively, of aggregate variation. Sectoral shocks account for only one-tenth of aggregate variation but represent 30% of the variation from Canadian sources.

Variation in Employment Growth in Canada: The Role of External, National, Regional, and Industrial Factors