Canada’s labor market has eroded fast since the glory days of the pandemic, and it may get worse soon. Statistics Canada (Stat Can) data shows the job vacancy rate for February came in at nearly half its peak rate just a few years ago. BMO Capital Markets warned investors this problem is combining with elevated unemployment to create a job market worse than we saw pre-pandemic. A problem they see getting worse if the trade war isn’t resolved amicably in the coming weeks.
Canada Has Fewer Jobs Available Than Pre-Pandemic
Canada’s job market has changed dramatically since the good old days of a pandemic. The seasonally adjusted job vacancy rate, the share of jobs unfilled as a percent of total jobs, peaked at 5.7% back in 2022. It was only lofty for a brief period, but it was enough to fuel immigration policy and the belief there’s a labor shortage.
The reality is coming in hard and fast for those looking for a job. The job vacancy rate was just 2.9% in February, nearly half (-49%) its peak 3 years prior. It was unchanged from a month before, but trimmed 0.8 points from last year. The only good takeaway from this is the Trade War didn’t inflict anything close to the hit many had anticipated—the quantifiable material impact was non-existent according to the Stat Can data.
“After a sprint higher in the months coming out of the pandemic, it is now lower than the level prevailing prior to COVID (it averaged 3.2% in 2019),” warns BMO chief economist Douglas Porter.
He’s been ringing the bell on the narrowing job opportunity for a few months now. An issue he sees compounding with another labor trend to create a strong negative headwind—the unemployment rate.
Canada’s Unemployment Rate Is Higher Than Pre-Pandemic
Canadian unemployment has been marching higher since hitting an all-time low around the same time vacancies hit an all-time high. The unemployment rate reached 6.7% in March, and has been hovering above the 6% range for some time. Porter notes this is about 0.6 points higher than pre-pandemic, about 9% more pressure.
He provided a chart of the two indicators overlapping, clearly illustrating the compounding pressures.
Canada Has Fewer Jobs & More Unemployed People
Source: Statistics Canada; BMO Capital Markets.
“So on both counts-the vacancy rate and the unemployment rate— the job market is weaker than pre-COVID levels. That’s a completely different world than three years ago, when for a brief spell there were more vacant jobs than unemployed Canadians (an actual labour shortage),” he explains.
Those looking for work, especially those relocating to study, should pay close attention to this data in the coming months. Not only is it harder to find a job (vacancy rate), more people are unable to find one (the unemployment rate). More Canadians now fall into the dreaded category of long-term unemployed, a sign of a job-labor mismatch that increases the odds the person will require retraining or upskilling to re-enter the workforce.
A problem the bank sees potentially getting worse soon. ”Those days [of excess jobs] are long gone: There are now almost 3 unemployed Canadians for every vacant job. The trade war could tip the balance even weaker,” warns Porter.