Canada’s population boom led to a talent windfall, but the country has no idea how to use it. Statistics Canada (Stat Can) data revealed much better-than-expected job gains in August 2023. However, those job gains failed to keep up with the population growth, ultimately softening the labor market. It may get a lot worse soon, with Stat Can estimating Canada needs to add about 50k jobs per month to maintain the strength of the current market. That would imply a near-record needs to be hit every single month.
Canadian Employment Surpassed Expectations—By A Lot
Canadian employment surged past expectations, setting aside concerns the economy is too tight. The economy saw employed persons rise 0.2% (+40k) to 20.2 million in August. Growth was expected, but this was monster growth—nearly double the consensus forecast for the period.
Despite the large job gains, the positive news wasn’t enough to erode the negative indicators. The unemployment rate remained flat at 5.5% in August, following increases in the previous three months. The employment rate, the ratio of employed people to the size of the labor force, also fell 0.1 points to 61.9% last month. A combination of contrary indicators is perplexing, but it has to do with the population.
Canada’s Unemployment Rate Is Creeping Higher
The seasonally adjusted monthly unemployment rate in Canada.
Source: Statistics Canada.
Canada Needs 50k New Jobs Per Month To Maintain Employment
Canada’s booming population is growing much faster than the country’s ability to create jobs. Its economy added 40k jobs, but its population jumped a whopping 0.3% (+103k people). Naturally, the rate of people employed as a share of the working population fell.
Improving Canada’s labor market won’t be an easy task. Stat Can estimates the country needs to add 50k jobs per month for employment to remain consistent. For context, it added an average of 31k jobs per month over the past 3 months, when the impact of record stimulus remained. During more typical times, the country added an average of 38k jobs per month from 2017 to 2019.
To put it bluntly, going into softening economic data—the country needs to raise its job creation goal by 30%, compared to its performance in normal times. It’s not impossible, but it’s a heck of a corner that policymakers painted themselves into.
“Employment is still rising, but so is the unemployment rate with job demand no longer strong enough to keep up with a rising supply of workers from surging population growth,” warned Nathan Janzen, assistant chief economist at RBC, Canada’s largest bank.
“…the central bank’s move to leave the overnight rate unchanged earlier this week was based on signs that the balance of labour supply and demand was improving – and the unemployment rate holding steady after three months of increases is still likely consistent with that view for now.”