Despite rising interest rates and talk of recession, Canada’s jobless rate fell in June to 4.9 percent, a new record low going back to 1976.
The acute labour shortage has pushed the average hourly wage up 5.2 percent from June 2021 (and up from 3.9 percent in May year-over-year).
Canadian wages are on an upward trend
As Derek Holt, Scotiabank’s Vice President and Head of Capital Markets Economics noted, the latest jobless report “puts Canadian wages back on a firmly upward trend after hitting a soft patch over February to April prior to which wage growth was very strong over the July to January period.
“Difficulty finding workers is raising their pricing power.”
Canada’s labour market is basically at maximum employment, and experts are predicting this will lead to more wage gains. This gap between demand and supply of jobs is one reason the Bank of Canada has vigorously tightened its monetary policy.
Older Canadians are leaving the workforce
Statistics Canada reported that the Canadian economy lost 43,200 jobs in June, a result of a voluntary exit of workers from the labour force, which dropped by nearly 100,000 in June. That’s the largest one-month decline on record outside of the pandemic.
The job loss was concentrated in central Canada. The reason employment fell is largely a large number of people aged 55 and older left the workforce.
Overall, the numbers illustrate the extent to which the nation’s labour market has run up against maximum employment, and will struggle to grow further without continuing to fuel wage gains. The imbalance between demand and supply of jobs is a primary reason why the Bank of Canada is tightening monetary policy so aggressively.
Employment rising for landed immigrants
As the Globe and Mail’s Matt Lundy wrote, “hiring conditions remain challenging in Canada, and at last count, employers were recruiting for about one million positions – far higher than job-vacancy levels before the pandemic. That’s putting upward pressure on salaries.”
Liam Daly, an economist with the Conference Board of Canada, told Shelby Thevenot of CIC News that amid the tight labour market conditions, employment has risen among diverse groups such as recently landed immigrants and core-aged Indigenous workers living off reserve. Also, the employment rate among core-aged female workers was at 81.3 percent, just below the record high recorded in May.
“The main takeaway here is that Canada has the tightest job market in generations, and now wages are starting to move with purpose,” said Doug Porter, chief economist at Bank of Montreal.
“The major point is that workers are now extremely scarce,” Porter said.
Job losses are in the service sector
“What is concerning,” said Perevalov in his report, “is the decline in employment in the retail and wholesale trade sector, which could be evidence of falling spending due to consumer fatigue with high price inflation translating into fewer jobs in the sector.”
Employers see immigration as a solution
Many employers are looking to an influx of newcomers to Canada to ease the labour shortage. The arrival in Canada of a record 431,645 new residents in 2022 may help alleviate the labour shortage. Canada has already landed about 200,000 new permanent residents this year and is on track to meet the 2022 target.
Higher numbers of newcomer arrivals are targeted for 2023 and 2024.
Other highlights from the most recent jobless report include.
- Part-time employment levels dropped by 39,100 and the number of full-time jobs fell by 4,000
- Wage growth for permanent workers hit 5.6 percent in June, up from 4.5% in May
- The decline in both employment and the labour force was led by youth and older workers
- The participation rate in the economy dropped 64.9 percent in June and hours worked were up 1.3 percent. That’s the first gain since March
- The provinces with the lowest unemployment rates were Manitoba and Saskatchewan
- Employment in Quebec dropped by 27,000 jobs in June but unemployment held steady at 4.3 percent
- Nationally, employment also declined in health care and social assistance (-20,000), information culture and recreation (-14,000), and educational services (-14,000) in June.
- Employment was up in public administration (+15,000).
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