'The reality is that Canada has a dynamic and robust labour market characterized by extraordinary labour force growth and steady employment gains'
Despite the reported unemployment numbers in Canada, the Canadian labour market is in a good place, according to two experts.
In November, Canada saw unemployment numbers rise to 6.8% from 6.5% in October. And the unemployment numbers have been at a high rate even in the months prior.
Still, there’s no cause for worry, said C.D. Howe Institute’s Don Drummond, fellow-in-residence, and Parisa Mahboubi, senior policy analyst.
“Media reporting last month on the release of November’s numbers painted a picture of economic distress, given the jump in the overall unemployment rate from 6.5 to 6.8%,” they said in the Financial Post.
“But the alarmed response missed critical developments in the underlying data: the reality is that Canada has a dynamic and robust labour market characterized by extraordinary labour force growth and steady employment gains.”
According to the latest Labour Force Survey from Statistics Canada, employment increased by 51,000 jobs (+0.2%) in the month of November. That is “pretty good by usual standards,” said the C.D. Howe experts.
“The ‘problem’ was that the labour force grew by an unprecedented 138,000 people (or 0.6%). As a result, the unemployment rate rose sharply even though employment grew more than respectably,” said Drummond and Mahboubi.
“But this kind of disconnect between headline numbers and economic reality is particularly pronounced during periods of rapid population growth,” said Drummond and Mahboubi.
They explained that from October to November, the number of people aged 15 and over grew by 80,000, while the labour force participation rate rose from 64.8% to 65.1%. The “part rate,” as economists call it, is just the number of people either employed or looking for work as a share of the population, according to them.
The year-over-year numbers “are equally striking”, as employment in Canada grew by 1.6% November-to-November, but the pace fell short of the 2.8% increase in the labour force and “the extraordinary 3.6% rise in Canada’s working-age population.
Another expert previously noted that one of the reasons why youth unemployment in Canada is so high is the sheer number of young people in the country entering the employment age, according to an expert.
“The result was a decline in the labour force participation rate and an increase in the unemployment rate from 5.8 per cent to 6.8 per cent. The real story here is that labour market is pumping out jobs yet struggling to absorb the influx of new entrants resulting from historically rapid population growth,” said Drummond and Mahboubi.
Another indicator of a positive Canadian labour market is strong wage growth: Average hourly wages rose by 4.1 per cent year-over-year to November, well above the 1.9% inflation rate.
“Not only is the labour market generating jobs, it’s also offering higher-paying opportunities,” said the C.D. Hower experts.
Now, the real challenge is integrating those who are entering the working age into the workforce.
“In our current situation, relying solely on the unemployment rate as an indicator of how the economy is doing leads to seriously misleading conclusions. The rise in unemployment mainly reflects extraordinary growth in the labour force, driven by equally extraordinary population increases. It is not a sign of economic stagnation. Far from it,” said Drummond and Mahboubi.
More than half of Canadian companies (51%) report plans to increase their employee count in the first half of 2025, according to a recent Express-Harris Poll survey.
Also, the latest ManpowerGroup Employment Outlook Survey (MEOS) found that the Americas is the most optimistic region when it comes to hiring this year.
