Canada’s labour market has managed to recoup the 3 million jobs lost during the pandemic. But demand for workers has been rising faster than hiring, leading to increased vacancies. Anthony Okolie speaks with Sri Thanabalasingam, Senior Economist, TD Bank about the outlook for the job market.
- Sri, according to your latest report, Canadian industries are still facing an ongoing labor shortage despite the impressive rebound that we've seen since the pandemic began. So can you first tell us where does the labor market stand today versus prepandemic levels?
- Sure. So since reopening in June, job gains have been strong in Canada. And as of September, employment was back at its prepandemic or February 2020 level. And in October, we saw further gains on top of that level.
- OK, so despite the rebounds in jobs, your report shows that hiring activity could be even stronger given the elevated number of job vacancies. So besides the ongoing health concerns that we've seen with Delta variant, as well as government support benefits, what other factors are weighing on the hiring recovery so far?
- That's right. Hiring activity could be stronger given the number of job vacancies we've seen. And there are some factors that are weighing on hiring. You have occupation switches as people that were previously working in one industry are looking for jobs in others. So there's this mismatch that's occurring between labor demand and supply.
You also have people that have been out of work for over a year, so there's a deterioration of skills that could have occurred that weakens the job finding process. And then we're not out of the pandemic yet. So you have any outbreak in child care centers or schools that would result in parents staying at home. And that could also weigh on hiring activity.
- And which industries specifically are you seeing the greatest labor shortages?
- There are two that really stick out. One is the food and accommodation service industry. This industry, with reopening, consumer demand rebounded quickly. And there are a large number of vacancies. And some businesses are struggling to fill those openings.
And then on the other side, you also have finance and insurance industry. That did quite well through the pandemic, given strong financial market activity, as well as real estate activity. But here, there seems to be more of a skills mismatch between what's demanded for staff versus the available skills in the labor force right now.
- And in your report, you also point to a surge in, I guess, what you're calling unclassified workers in Canada. So can you help define, what does unclassified workers mean specifically? And where do they fit in the overall labor market picture?
- Sure. Unclassified workers are defined by Statistics Canada as people who are looking for a job, but they last worked over a year ago or have never worked at all. And as I had mentioned with long-term unemployed, these are people who have been out of work for over a year. This unclassified section of the labor force has really surged.
Now, when we think about how it may play out going forward, presumably many of these people last worked in the food and accommodation services industry. And if they take those jobs or they're able to locate jobs in this industry again, this would ease some of those labor shortages.
- What about the retail side of this? How are they coping? And what are the implications for the upcoming holiday season?
- So for the retail industry, right now, we haven't seen significant labor shortages. But when we think about the holiday season and the increase in hiring, if they're unable to find workers, this would have an impact on economic activity, a negative one. But retailers are facing a double whammy, not just on potential labor shortages, but then there's also these supply chain constraints, which could limit the products that they have in stock. And that could also weigh on economic activity, as well.
- Despite these shortages in the job market, why haven't we seen a noticeable uptick in Canada's wage growth? And could that change?
- Well, businesses that are facing labor shortages right now seem to be undertaking other measures to deal with this, such as reducing their operating hours. But as long as the consumer demand is quite strong and they're facing pressures to operate at full capacity, they would likely need to increase wages to attract new staff. But that's that.
Again, we're seeing these shortages in some industries. And right now, it's not really widespread in the Canadian economy. But as the economy progresses down the road to recovery, then we could see wage growth broaden out to other areas of the economy, as well.
- Sri, thank you very much for joining us.
- Thanks, Anthony.