It was a good year to be a job seeker in 2022, and despite a looming recession 2023 may prove to be much of the same. Following an epic year of record-breaking employment data, the Canadian labour market closed out 2022 with a bang — adding 104,000 jobs in December and dropping the unemployment rate to a mere 0.1% above the record low of 4.9% reached in June and July.
Speaking of record-breaking numbers, the rate of inflation in Canada hit a 41-year high in June of this year reaching 8.1% year-over-year. On average, prices have risen faster than hourly wages, which increased by 5.1% year-over-year in December.
In an effort to cool the economy the Bank of Canada (BoC) has been rapidly raising their rates over the last year. With seven rate hikes since December 2021, the BOC’s rate rose four full percentage points from 0.25% to 4.25%.
According to Tiff Macklem, Governor of the BoC, “higher interest rates will work to slow spending and labour demand in the economy, and over time, this will relieve domestic inflationary pressures.” Ultimately, he says our economy is overheated and the tight labour market is a symptom of the supply and demand imbalance fuelling inflation.
Yet despite these massive rate hikes over the last year, the labour market has not shown any signs of slowing down. This is likely due to the fact that a reduction in labour supply was already beginning pre-pandemic due to the aging Baby Boomer population. With many older Canadians choosing to retire early, many others exiting the labour force long-term and slower immigration, the job seekers remain in high demand.
Keeping in the 2022 theme of record breaking, Canada welcomed 431,645 new permanent residents in 2022, breaking the previous record of 401,000 the year earlier, which itself beat a previous record that had not been broken since 1913.
With Canada’s aging population, the worker-to-retiree ratio is expected to shift from 7 new workers to 1 retiree from 50 years ago to a 2:1 ratio by 2035. According to the Ministry of Immigration, Refugees and Citizenship Canada (IRCC) immigration accounts for nearly 100% of Canada’s labour force growth. Canadian employers agree, in a survey conducted by the Business Council of Canada last year, two-thirds of companies expect to increase their usage of the immigration system to address labour shortages over the next three years.
But will immigration alone solve the Canadian labour shortage? Probably not and definitely not in the short term. According to a recent survey, CBC reported more than half of Canadians will be looking for a new role in 2023 which will contribute to the talent churn and ineffectiveness of businesses succeed. The majority of those looking to move are motivated by higher salaries, better perks and benefits and greater opportunities for advancement. As a result, employers of businesses in Canada are looking at retention as a priority for 2023 while addressing potential recession constraints.
Over the last year and a half since restrictions have loosened and a sense of normalcy began to appear, the labour market has rebounded with a million more Canadians working now compared to February 2020. Now we are facing record-breaking employment numbers and historically high job vacancy rates nationwide.
In the long run, Macklem argues the Bank of Canada is striving to find a balance. If interest rates stay low inflation will continue to rise, however if interest rates are too high the economy could slow down more than it needs to, and unemployment will rise.
While we can’t know for certain how the potential recession of 2023 will develop, we do know that Canadian businesses are eager to continue their current growth mindset and employers are chomping at the bit to hire the best and brightest talent available to them — if they can find them.
Are you an employer looking for qualified candidates in the tight labour market? Contact us to set up a consultation with one of our specialty account managers. Or if you’re a job seeker looking to take advantage of a career move, Agilus Work Solutions partners with some of Canada’s top employers and are constantly seeking new candidates with all different skillsets and backgrounds. Check out our job board to apply now.