Canada’s labor market revealed yet another sign of cooling. Statistics Canada (Stat Can) data reveals involuntary part-time workers were on the rise in August. Involuntary workers have increasingly represented a share of part-time workers, hitting a nearly two-year high. The data reveals the overheated economy is quickly normalizing, an interesting potential headwind for overheated asset values.
Involuntary Part-Time Employment
Involuntary part-time employees are underemployed workers. The worker is ready and willing to work full-time, but doesn’t work more than 30 hours per week. This can be due to a reduction in hours due to business conditions, as seen during lockdowns. It also includes people who are unable to find full-time work. In short, it’s another form of underutilized labor in the economy—not unlike unemployment.
Labor supply is a delicate balance. Too little labor leads to a non-productive increase in wages, meaning it’s a raise—but not due to increased output (either in quantity or value). It may sound nice, but it tends to occur during periods where inflation eats up at least the extra wage growth.
An oversupply of labor can lead to wage suppression, which tames inflation but amplifies a downturn. Working insufficient hours means a smaller cushion in the event of economic shock. That economic shock provides even more underutilized labor, resulting in competition for increasingly scarce work. Canada’s current population boom is already failing to utilize its labor, and this could make the problem a lot worse.
Nearly 1 In 5 of Canada’s Part-Time Workers Are Involuntary
Canada has seen involuntary part-time workers climb sharply over the past 12-months. Nearly 1 in 5 (18.9%) part-time workers were involuntary in August. This represents an increase of 0.9 points that month, with the share 1.8 points higher than last year. It was the highest share since September 2021—nearly two years ago.
Nearly 1 In 5 Canadian Part-Time Workers Can’t Find Enough Work
Canadian involuntary labor as a share of part-time workers. Involuntary part-time workers are those able, ready, and willing to work more than 30 hours per week, but can’t due to business conditions or an ability to find more work.
Source: Statistics Canada; Better Dwelling.
The highest share in two years sounds concerning, until one zooms out. The ratio isn’t particularly high, and prior to the pandemic it’s about October 2019-levels. By all-measures, it’s a fairly normal share—and that’s the concern.
Canada’s Economy Is Getting Rid of The Excess—Does That Include Asset Values?
Canada’s overstimulated economy is beginning to finally show signs of returning to normal. Wages, CPI, and the employment rate are all showing signs of softening. These measures are currently elevated, but higher interest rates have led to decelerating growth.
The normalization of involuntary part-time workers is a part of a broader trend of normalization. That’s the ideal situation from a macro and central banking perspective. However, it’s likely a lot less palatable to those on the receiving end of a weaker labor market. If asset values also adjust to reflect more tepid economic conditions, asset holders may be less-than-welcoming as well.