Quick take

Job growth is losing steam

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  • The Canadian economy added just 31,000 jobs in October, a far smaller increase than in recent months. The labour force participation rate slipped to 65.3 per cent while the unemployment rate inched down to 6.7 per cent.
  • Notable gains in retail trade (+72,000) and other services (+20,600) were partially offset by losses elsewhere. Employment in the accommodation and food services industry fell for the second consecutive month (-27,000), the largest decline of any industry. In the goods economy, employment fell (-6,200) as gains in construction (+4,300) were more than offset by a reduction in manufacturing employment (-7,700).
  • Across the ten provinces, employment rose in Ontario and New Brunswick. These increases more than offset declines in Manitoba and Saskatchewan. In British Columbia and Quebec, employment was virtually unchanged.
  • Total hours worked increased by 1.0 per cent. Still, unlike employment, this measure is yet to reach the pre-pandemic level of February 2020. Meanwhile, in a sign of falling labour underutilization, the number of people working half their total hours was down this month but remains 14.5 per cent higher than before the pandemic.

Key insights:

  1. After employment surpassed the pre-pandemic level in September, you would be forgiven for thinking the jobs recovery was complete. But since the pandemic’s onset, the Canadian population has grown by over 480,000. The employment rate (employment as a share of population) rose to 61.0 per cent in October and remains 0.8 per cent below the rate recorded before the pandemic. Based on today’s population, this difference amounts to just over 250,000 jobs. There’s still lots of work to do.
  2. In a week in which Ontario announced a rise in the minimum wage, some question whether higher wages may fuel further inflation at a time when supply shortages are already causing prices to rise. However, much depends on productivity growth. The pandemic forced firms to invest in new technology, relocate staff remotely and accelerate the digitalization of many operations. If these innovations yield sustained productivity growth, they could offset the impact of any wage increases on inflation.
  3. Of those unemployed, the proportion who are considered long-term unemployed grew during the pandemic and remains stubbornly high. The expansion in long term unemployment is disproportionately impacting less-educated workers. Long stints out of work lead to skills atrophy and future earnings losses, especially for younger workers. Reducing long term unemployment is an important prerequisite for an inclusive labour market recovery.

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Liam Daly

Liam Daly

Economist

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