Canada’s job market is improving despite warnings against slowing population growth. The unemployment rate fell in June, helped by tens of thousands of new jobs being added. This pushed the employment-to-population ratio to a 3-year high. A significant job deficit remains, but the economy may be on track—if policymakers avoid reverting to chasing short-term, non-productive growth.
Employment-To-Population Growth Ratio
The employment-to-population growth ratio is the number of jobs created for each person added to the population. Analysts use it to determine if a country is creating enough jobs to keep pace with its population growth. Here’s a quick overview on how to read this data:
A weak ratio is below 0.5 and means people are added faster than jobs are created. That’s bad news since demand pressures for necessities continue to push prices higher, but more people are unable to obtain income, creating a dependency issue and economic drag. Ironically, policymakers chasing excessive growth to solve a dependency ratio 20 years down the road create a dependency ratio issue today.
A ratio between 0.5 and 1.0 is considered healthy, where job creation keeps pace with population growth. This is the sweet spot that policymakers should be trying to maintain.
A ratio above 1.0 means job creation is greater than population growth, which may be necessary during recoveries but unsustainable long term. That’s needed to rectify jobs losses post-recession, but it’s not where an economy wants to stay over time. Excessive job growth for a population tends to become non-productive and inflationary, once again slowing an economy.
Canadian Employment-To-Population Ratio Back To Growth
Canada’s monthly employment-to-population growth ratio hit 1.78 in June, meaning 1.78 jobs were created for every person the population added last month. It was the highest ratio since February 2022, following the COVID-era losses. While it seems excessive, just 1 in 5 months since 2010 have been at this level. According to the numbers, last month’s economy was a recovery boom, and that’s essentially what we’re seeing.
The annual ratio remained weak—though improving dramatically from the damage done in recent years. The 12-month employment-to-population growth ratio was 0.44 in June, the highest since December 2023. Still a deficit but not as bad as the 0.25 ratio reported in October 2024, indicating just 1 job was being created for every 4 people added. Prior to 2020, the ratio hadn’t been this low since the 2015 Oil Patch Recession.
The balance is improving but it will take quite some time to get this back on course. The persistently low ratio, even with a boom post-pandemic, has created a significant job deficit. Since the start of 2020, Canada’s unemployed population has risen 38% (+431k people) faster than the population. That only includes the people who are actively seeking jobs, discounting those voluntarily sitting out of the market for whatever reason.
Canada has only seen a few months of normalized population growth, but the early signs are promising. Aggregate GDP may soften in the short-term, but a healthier job balance will lift per capita GDP—a more meaningful indicator of quality of life. Over time, stronger household incomes will drive broader economic growth.
That is, of course, if policymakers resist falling back on arbitrary growth targets and embracing the philosophy of cancer—growth for the sake of growth. Heaven forbid households find a job, buy a house, and establish a decent quality of life instead of intentionally applying downward pressure on wages.