'Canada's labour market is relatively well positioned to handle the coming macroeconomic slowdown,' says TD economist
The labour market in Canada is expected to continue cooling in 2024 but will hold up better compared to previously observed cyclical downturns, according to TD Economics.
“Canada’s labour market is relatively well positioned to handle the coming macroeconomic slowdown,” says Marc Ercolao, economist at TD.
“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, he says, primarily as a consequence of 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.
Employment in the previous year grew by 2.4%. This translated to a total of 500,000 net new jobs.
Net employment gains for Canada
Contrary to what some forecasters had anticipated, there weren’t any mass job losses, even as the private sector’s creation of jobs had decreased in the recent months. The weaker hiring allowed the excess tightness in the labour market to breathe as the unemployment rate reached 5.7%, which was near the levels seen in 2019, said TD.
2024 is expected to see labour supply being the dominant driver of the higher level of unemployment in the country despite labour force gains slowing down due to weaker job prospects and a pull-back in immigration rates.
Although, net employment gains were forecasted to weaken, with the national unemployment rate reaching 6.7% by the last quarter of 2024.
Employment by provinces, sectors
Provinces will be seeing varying trends when it comes to the unemployment rate as Quebec, Ontario, and British Columbia may see average annual unemployment rates ranging from 1 to 1.6 ppts in 2024, according to the report.
Alberta and the Atlantic provinces are expected to see more moderate upward moment as the prospects for employment can still keep up with the growth of the labour force.
Public services industries such as healthcare, public administration, and education as well as the oil & gas and construction sectors take the highest numbers of labour demand. Job vacancy rates for the sectors of finance, insurance and real estate, professional services, and manufacturing have almost reached levels seen before the pandemic, according to the TD report.
The report also found that the national wage growth will cool down following the slowing down of employment, the increase of unemployment, and the decline of job vacancies. Although, rising union wages can play a part in delaying the moderation.
The participation rate is also expected to decline in 2024 as the trend of the ageing population and factors such as longer lengths of education attainment and growing numbers of discouraged employees continue to persist.