Employment Stagnant Again in November

Key insights

Canada’s economy contracted 1.1 per cent (annualized) in the third quarter, following a downward revision of preliminary estimates by Statistics Canada. This result signals that excess demand in the economy is disappearing and explains the muted labour market performance over the last two months. We expect job creation to remain weak over coming months. Falling job vacancies point to weakening labour demand, even as layoffs have so far remained low. The shifting dynamics in the labour market are causing upward wage pressure to ease, even though near-term inflation expectations among consumers and businesses remain elevated. Meanwhile, the pace of population growth is expected to stay strong, although a drop in temporary resident arrivals is a downside risk. International migration will continue to buoy labour force growth but will also contribute to further increases in the unemployment rate.

As the labour market cools, job growth is slowing, and the unemployment rate is rising. The jobless rate of young workers is typically higher than core-aged workers, but this gap has widened in recent months. During economic downturns, young workers with less experience and job tenure often struggle to obtain employment and find themselves at the front of the line when firms make layoffs. The pandemic resulted in losses of earnings and disruption to careers, the effects of which are known to persist over time. The present worsening in labour market conditions are set to further increase financial precarity among a younger generation faced with elevated housing costs and who, by most estimates, will be worse off than their parents.

Efforts to support labour force growth in Canada have centered around boosting immigration. Yet bringing newcomers to Canada is just the first step. The success of Canada’s immigration strategy relies strongly on integrating newcomers into the labour market. This involves reducing gaps in labour market outcomes such as earnings, as well as working to ensure that skills and experience are fully leveraged to reduce overqualification rates. The contribution and benefits of immigration accrue over time and therefore immigrant retention is key. However, a recent report published by The Conference Board of Canada found that onward migration, immigrants leaving Canada, is increasing. These departures undermine the ability of immigration to support economic growth and prosperity, given the pressures caused by population aging.

The report highlights the critical role of settlement services and the need for infrastructure investment to match the demands of a fast-growing population.