Quebec and New Brunswick at opposite ends of the employment spectrum
Canada's job market has weathered the Bank of Canada's intense monetary tightening pretty well, according to a new TD Economics report.
Last year, the nation saw employment grow by 2.4%, adding about 500,000 new jobs. Despite a slowdown in new jobs from the private sector in recent months, the big job losses some were expecting haven't happened.
Instead, a slight uptick in the unemployment rate to 5.8% has eased some of the previous pressure on the labour market, bringing us back to the unemployment levels of 2019.
Provincial employment growth varied last year, with British Columbia, Newfoundland & Labrador, and Saskatchewan experiencing slower growth compared to the national average. However, hiring in these provinces progressed at a respectable pace of between 1.6% and 1.8%.
On the other hand, Alberta, Manitoba, and most Maritime provinces saw job growth exceed 3%, driven by strong population increases. Ontario and Quebec had a solid year of hiring but faced quicker rises in unemployment rates than most regions.
“Looking ahead to 2024, a continued cooling in overall labour market conditions is to be expected, but adjustments may play out differently than in previous cyclical slowdowns,” the report read.
A key driver for the expected rise in unemployment rates across Canada will be an increase in the number of people looking for work, a trend that has dominated since mid-2023 and looks set to continue despite a slowdown in the growth of the labour force and a slight pullback in immigration from last year's record levels.
Quebec is looking at the biggest gap between the growth of its labour force and job creation, which is expected to push its unemployment rate up by 1.5 percentage points. New Brunswick is on the other end of the spectrum, with a smaller gap and a lower expected rise in unemployment. Nationally, the unemployment rate could reach 6.7% by the end of 2024 before it starts to dip slightly in 2025, still above the long-term average but lower than the highs of past downturns.
Sector-wise, certain industries like healthcare, public administration, education, oil and gas, and construction are still hungry for workers despite a general downturn in job vacancies from the peak in 2022. This strong demand for labour, particularly in the Maritime provinces as well as Alberta and Saskatchewan, is expected to keep employment levels buoyant in these areas.
Wage growth across Canada, although cooling from the highs seen during the pandemic, is still strong at 5.5% year-on-year as of December. This is partly due to rising union wages, with nearly a third of the Canadian workforce unionized, leading to some of the highest wage increases since the early 1990s. This trend might slow the normalization of wages across various regions.
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The participation rate in Canada is expected to continue its downward trend, impacted by an aging population and other structural shifts. After a temporary increase following the pandemic, thanks to strong immigration and population growth, the participation rate is projected to decrease, reflecting longer-term trends in the labour force.
“Canada’s labour market is relatively well positioned to handle the coming macroeconomic slowdown,” TD Economics said. “Unlike in past downturns, and barring any major unforeseen events, continued but slowing hiring absent substantial economy-wide layoffs should remain a focal point.
“That said, national and provincial unemployment rates will drift higher over the year, primarily as a consequence of the growing labour supply. Wages will likely be the last shoe to drop but should normalize as labour demand fades. Meanwhile, participation rates may continue on their historical downward trend.”
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