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April Showers Didn’t Dampen the Labour Market

Canadian Economics

By: Jake Lenarduzzi, Liam Daly

  • In April, employment in Canada rose by 0.4 per cent following little change in March. Meanwhile, on the back of continued robust population gains, the labour force expanded by 0.5 per cent. Despite a greater share of the labour force searching for work, the unemployment rate held steady at 6.1 per cent.
  • Employment in the goods-producing industry fell by 0.3 per cent, led by declines in the utilities, agriculture, and construction. These were partially offset by gains in the natural resources and manufacturing. Meanwhile, employment in the service economy grew by 0.6 per cent, with a notable 2.2 per cent gain in accommodation and food services. A small portion of the service upturn was offset by a 0.3 per cent decline in educational services employment.
  • Across Canada, employment rose in nine of ten provinces. New Brunswick had the highest employment increase at 2.0 per cent, whereas Nova Scotia was the only province to see employment contract, albeit by just 0.2 per cent.
  • After several months with little change, private sector employment rose by 0.4 per cent, with the public sector also rising by 0.6 per cent. More positivity came from youth employment, which experienced its first monthly increase dating back to December 2022. April brought a 1.5 per cent spike in employment for youth aged 15 to 24, with a 2.8 per cent uptick among young men.
  • Average hourly wage growth increased 4.7 per cent on a year-over-year basis following growth of 5.1 per cent in March.

Insights

In a weaker business environment, hiring across the economy has slowed. April was an exception to generally softer labour demand, but the fundamentals so far in 2024 remain on the weaker side. Rising labour supply and falling demand is reducing tightness in the labour market. Lower competition for workers is gradually weighing on wage growth, which we expect to decelerate further over the coming months. For a more detailed picture of hiring activity, see our Canadian Hiring Index, published monthly.

As the unemployment rate rises, the number of people receiving Employment Insurance (EI) is rising. In February, there were 20 per cent more EI beneficiaries than a year ago. Among younger workers, the increase was even larger, with the number jumping by more than 30 per cent. Data shows that the slowdown underway in the labour market is hitting younger workers harder. The unemployment rate has jumped by almost 3 per cent among workers aged between 15 and 24 in the last twelve months, while a drop in participation rates signals growing numbers are opting to pause their job search all together.

Changes to the Temporary Foreign Worker (TFW) Program reflect an evolving migration strategy. These changes, which became effective this month, include a reduced validity period for Labour Market Impact Assessments, required for firms looking to hire a TFW. Additionally, the share of low-wage workers that businesses may hire through the TFW program will be reduced from 30 per cent to 20 per cent. The share of temporary residents in Canada rose sharply in both 2022 and 2023, as rules were eased in an effort to bolster the supply of labour in the post-pandemic economy. But conditions in the labour market (and broader economy) have shifted. Amid a higher rate of unemployment, and growing scrutiny of Canada’s temporary resident streams, the government has announced a plan to impose a “soft cap” on the share temporary residents in the population. Reducing Canada’s reliance on low-wage temporary resident labour may help spur innovation but this must be balanced with pressures of an aging population and the need to maintain labour capacity in areas such as healthcare and construction.

For supplementary details on the state of Canada’s business environment, please see our Index of Business Confidence.

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