Canada’s unemployment rate hit a record low in March as employers bulked up their staffing levels – the latest sign of rapid expansion in the country’s labour market.
The economy added 73,000 positions last month, following a blowout return of 337,000 in February, Statistics Canada said Friday. The unemployment rate fell to 5.3 per cent in March, which is the lowest in nearly five decades of comparable data from the country’s Labour Force Survey.
The job gains in March were entirely in full-time positions, paced by Ontario (35,000) and Quebec (27,000). The private sector accounted for more than half the increase. Around 19.6 million Canadians were employed last month, a rise of 2.3 per cent – or 442,000 individuals – from when the pandemic started.
Several analysts said the upbeat job numbers reinforced their view that the Bank of Canada will raise its benchmark interest rate by 50 basis points, to one per cent, at next week’s decision. (A basis point is 1/100th of a percentage point.) The central bank has not hiked rates by 50 basis points in a single decision since 2000, but its governor, Tiff Macklem, has said he will not rule out such a move as he tries to rein in lofty inflation.
“The key takeaway is just how tight the job market now is, and that the employment recovery is now complete – arguably more than complete,” Bank of Montreal chief economist Doug Porter said in a note to clients. “For policymakers, both monetary and fiscal, the message is crystal clear – we are long past the need for stimulative policies, and in fact in need of notably tighter policies.”
The staggering growth in Canada’s use of temporary foreign labour
A lengthy hiring binge – notwithstanding a brief setback in January owing to the Omicron variant – is creating a challenging environment for many employers. Statscan on Friday said there was “downward pressure on the supply of labour,” noting that employment growth since September is easily outpacing gains in the adult population.
Those tight conditions are leading to better pay. Average hourly wages rose 3.4 per cent in March on an annual basis, accelerating from 3.1 per cent in February. Meanwhile, the country’s inflation rate recently hit a three-decade high of 5.7 per cent, meaning the average worker is effectively seeing a pay cut.
As tight conditions persist, the only way for wages to go is “straight up,” Mr. Porter said.
The share of businesses facing labour shortages that limit their ability to meet demand remains high, according to a Bank of Canada survey published on Monday. Most companies expect shortages to last until at least 2023, and they attribute the situation mostly to structural changes, such as people’s shifting job preferences.
The accommodation and food services industry is filled with stories of workers decamping to other sectors over the course of the pandemic. While the industry added 15,000 jobs in March, it remains the furthest from a return to prepandemic levels of employment: its total number of positions is down 15.9 per cent (195,000). Although the pool of jobs is smaller, restaurants and hotels are having trouble finding as many workers as they want. In the fourth quarter of 2021, they were recruiting for more than 143,000 positions, the most of any industry.
Despite that need, average hourly wages in hospitality rose just 1.4 per cent in March from a year earlier.
Waning joblessness extends to many groups. The unemployment rate for men aged 25 to 54 hit a record low of 4.1 per cent last month. (For women of that age, it was 4.9 per cent.) Unemployment also reached a historic low for recent immigrants, but their rate was still nearly double that of Canadian-born workers.
A troubling aspect of Canada’s economic recovery is that labour productivity – that is, output per hour worked – has continued to slip. Instead, the country’s economic growth is being driven by more people working more hours. Corporate leaders have bemoaned a lack of vision from the federal government on stirring productivity gains.
Thursday’s federal budget “had nothing of substance to offer in terms of addressing the nation’s number one economic challenge, which is the interplay between tanking productivity and soaring inflation,” Derek Holt, head of capital markets economics at Bank of Nova Scotia, said in a report. “Failure to treat this seriously risks impairment of fiscal conditions in [the] future.”
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Matt Lundy