Reviewing The State Of The Labour Market

Earlier this month, Statistics Canada released its monthly Labour Force Survey (LFS), covering March 2024. Though economists expected modest job gains last month, StatCan’s figures demonstrate that Canada’s labour market is treading water. A relatively strong post-pandemic labour market continues to slowly weaken and crack.

Overall, employment in Canada was little changed last month, with the employment rate dipping slightly to 61.4 per cent and the unemployment rate edging up to 6.1 per cent (+0.3 percentage points).

During the previous two months, the Canadian economy added 78,000 jobs. In March, it shed 2,200. Despite these prior modest job gains, the employment rate — the proportion of the population that is employed — has fallen for six consecutive months. On a yearly basis, employment is down nearly a full percentage point. Meanwhile, between January 2023 and January 2024, Canada’s population grew by 3.2 per cent, the fastest pace since 1957. Put simply, as immigration has surged, the population has grown faster than the economy has added jobs.

Declines in employment were concentrated among young workers, 15 to 24 years of age (down 1 per cent) while employment was little changed for core-aged women and both women and men 55 years and older. Over the past year, employment has fallen by 4.8 percentage points for young women and 4 percentage points for young men. Outside of the pandemic, the share of employed young workers (55 per cent) is the lowest it’s been since 2012 (outside of 2020 and 2021), a troubling trend.

Core-aged men, on the other hand, saw slight employment gains last month. After adding 20,000 jobs, the employment rate among prime working age men stayed just above 87 per cent for the third consecutive month. Employment among this group remains above the average observed between 2017 and 2019, though it has fallen by 0.6 percentage points since March 2023.

For core-aged women, the story is less rosy. After seeing historic job gains following the pandemic, employment among prime working age women has been on a slow decline. Peaking at 82 per cent in January and March of last year, the core-aged women employment rate has fallen back to 81.3 per cent. Though this is still above the average seen between 2017 and 2019, the downward slope of women’s employment is a further worrying sign.

Job losses were also heavily concentrated in particular sectors. Employment in accommodation and food services was down by 27,000 (or -2.4 per cent). Wholesale and retail trade and professional, technical, and scientific services saw employment declines of 23,000 (-0.8 per cent) and 20,000 (-1.0 per cent), respectively.

Regionally, Ontario posted modest employment gains of 26,000 jobs (0.3 per cent), while Quebec, Saskatchewan and Manitoba had employment losses.

On a yearly basis, unemployment has risen a full percentage point and is now the highest it has been since November 2021. If we exclude the period of pandemic restrictions, the last time unemployment was this high was late 2017.

Rising unemployment was observable across age groups. Both core-aged men and core-aged women posted year-over-year unemployment growth. Among core-aged men, unemployment jumped 1 percentage point from a year prior (to 5.5 per cent), while it rose 0.5 percentage points among core-aged women (to 4.8 per cent).

March’s unemployment growth was driven by greater numbers of workers searching for work or on temporary lay-off. As StatCan documents, the number of officially unemployed workers in Canada reached 1.3 million last month, an increase of 247,000 people, or 23 per cent, from one year prior.

Perhaps even more concerning, the LFS found that nearly two-thirds (64.9 per cent) of people unemployed in February remained so in March. Over the same period last year, the corresponding share was 60.5 per cent. This is an indication that the unemployed are having a more difficult time securing new jobs. If long-term unemployment continues to grow, it will be a clear sign of labour market trouble.

Further indicating the deteriorating conditions of young workers, youth unemployment rose a full percentage point to reach 12.6 per cent. This is the highest youth unemployment rate since September 2016 (excluding 2020 and 2021) and represents a rise of 3.1 percentage points since youth unemployment reached its lowest point (9.5 per cent) one year ago.

The unemployment figures for March also provide insight into racial disparities in the Canadian labour market. Between March 2023 and March 2024, the unemployment rate among core-aged Black workers grew by nearly 4 percentage points to reach 10.8 per cent, with Black women’s unemployment rate even higher than Black men’s (11.1 per cent vs. 10.6 per cent). As labour market conditions deteriorate, historically disadvantaged groups typically bear the brunt of the economic fallout.

Unifor’s analysis of the monthly jobs report provides further evidence of a weakening labour market. As they note, involuntary part-time work (i.e., workers employed part-time who would prefer full-time work) has risen sharply recently to 40.1 per cent of part-timers. Labour underutilization and underemployment are also both up more than 1 percentage point year-over-year. These figures indicate that Canada’s economy is functioning well below full capacity and is consequently squandering the potential of un- and under-employed workers.

On the plus side, average hourly wages continue to register healthy gains, which the Bank of Canada is citing as evidence for pushing off an interest rate reduction. According to StatCan, average hourly wages rose 5.1 per cent in March, up $1.69 to $34.81.

At the same time, we should be cautious when interpreting these wage data. With inflation still elevated, real average hourly wages rose by just 2.3 per cent year–over-year in March. Furthermore, in January, separate StatCan payroll data put the growth in average weekly earnings at 3.9 per cent. Adjusted for inflation, real average weekly earnings were therefore just 1 per cent as of January.

Despite continuing to post significant job vacancies while suffering from a staffing crisis, the healthcare and social assistance sectors added 40,000 jobs in March, a growth of 1.5 per cent. Since May 2023, these industries have added 123,000 jobs. Yet, despite this cumulative job gain, healthcare and social assistance still posted more than 133,000 unfilled positions in January and continued to account for more than one-in-five job vacancies across the economy.

This brings us to a particular issue raised by some commentators since the last jobs report: the growth of public sector employment. As StatCan points out, public sector employment has grown faster than private sector employment over the past year (4.8 per cent vs. 1.1 per cent). In response, a chorus of concern has emanated from familiar circles. According to some, a “ballooning” and inefficient public sector is dragging down Canada’s economic performance and drawing workers away from the private sector.

Embedded in this thinking is a false notion that only the private sector produces economic value. As well, such thinking fails to account for the fact that production in the private sector heavily depends on the social reproductive labour of the public sector, from educating children to caring for the elderly and the sick. At a time of acute crisis across the care sectors, it is especially tone deaf to bemoan the growth of public sector employment.

Moreover, as others have pointed out, there is some creative use of data at work in this fear-mongering over the growth of the public sector. When the shares of private and public employment in Canada are tracked over time, recent public sector job growth looks like far less of an outlier.

Relatedly, this discourse on the supposed economic ‘risks’ of a large public sector has been nationally myopic. Comparatively, Canada’s share of public sector employment is average at best. Many other countries, some of whom are wealthier than we are on a per capita basis, devote a much larger share of their GDP to government spending and employ a larger share of workers in the public sector. In short, there is no great economic risk to devoting public dollars to social provision and care.

Last, the notion that the public sector is luring talent away from private enterprise is instructive. One could simply interpret this as workers seeking better wages and job security. If private enterprise can’t attract workers, some self-reflection might be in order.

March’s job figures don’t evoke great confidence. For the time being, things remain relatively stagnant. But if cracks continue to widen, many more workers may soon find themselves in difficult situations.

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