Labour Market Runs Out of Steam as Workers Become Increasingly Hard to Find

By: Liam Daly

  • Employment made minimal gains in April in a sign that the Canadian economy is at full employment. Total employment rose by 15,000, labour force participation ticked down to 65.3 per cent, and the unemployment rate inched down to 5.2 per cent.
  • There were relatively few sectors that recorded a significant change in employment. The largest gains were recorded in professional, scientific and technical services, public administration and information, culture and recreation. Meanwhile, there were notable declines in the retail trade and construction sectors.
  • Employment rose in just 4 of the 10 provinces. Growth in the Atlantic region and Alberta was offset by an employment decline in Quebec. In the other provinces: Ontario, Manitoba, Saskatchewan, British Columbia and P.E.I, employment was little changed in April.
  • Wage growth remains elevated, though it still trails inflation. In April, wages increased by 3.3 per cent on a year-over-year basis, a similar rate to the previous month. The sixth wave of the pandemic resulted in a higher number of absences in April. As a result, total hours worked fell by 1.9 per cent, and labour underutilization, measured by the number of people working half their usual hours, rose as a higher number of workers fell ill.

Key Insights:

  • Record low unemployment and sky-high job vacancies have prompted federal and provincial governments to ease regulation on hiring temporary foreign workers (TFW). The recent legislative changes reflect a growing sense of urgency around labour shortages. The move will make it easier to hire TFWs and allow employers to employ a higher number of TFWs. While the changes have been welcomed by industry stakeholders such as the Canadian Federation of Independent Business, closed work permits that tie workers to employers can reduce employees’ bargaining power and increase the risk of exploitation.
  • Amid high inflation and low unemployment, the likelihood of industrial action is increasing. Year-over-year, CPI growth hit 6.7 per cent in March, the highest rate in 31 years. In addition, growing labour scarcity is strengthening the negotiating position of workers. As Canadian households continue to bear the pressure of rising prices and rising interest rates pushing up borrowing costs, worker remuneration will take centre stage in upcoming contract negotiations. Historically, when unemployment is low, and inflation is high, the number of work stoppages increases.
  • Increasing labour force participation among older workers is an important task. Despite recovering from the decline in the early stages of the pandemic, participation rates among 55–64-year-old workers in Canada lag behind that of some other G7 countries, including Germany and the United Kingdom. Today, Canadians are living longer and having fewer children. In the years ahead, the loss of workers through retirement will continue to exceed the number of young Canadians entering the workforce. Alongside a sustained focus on countering age-based discrimination, policy must ensure that the retirement income system accommodates rather than penalizes those who choose to remain in work longer.