Last week the Canadian government released a new round of employment numbers. They weren’t stellar, but they weren’t bad – 7% unemployment. Now that’s almost twice as high as China, and a couple of points above the US, but once again not terrible. Although, a closer inspection revealed that only half of people in Canada have a source of income.
If that weren’t bad enough, that number is rapidly rising. Unemployment stats fail to reflect a significant number of people that just don’t work. Unfortunately, this will change the future of our economy, and Canada in general – and not in a good way.
Cooking The Employment Books
You’ve heard the term unemployment, but you likely don’t know how we get that number. If you do, great! If not, basically the government determines who’s working by conducting a casual census-like survey. 50,000 households get contacted, and they ask them about their employment. You can probably see how this is imperfect.
If your husband/wife/partner has been looking for a job for a while, you have two answers. You can tell a stranger about their struggle to find work, or you can just say they aren’t looking. If you say they aren’t looking, they’re deemed a non-participant of the labour market.
Now the problem is, the number of participants of the labour market is dropping fast. The latest report cited that this is the lowest number in the 15 years of data that StatsCan provides – only 65.5%. That’s only 19.4 million “participants”, out of 29.3 million eligible Canadians. The 7% unemployment is removed from that number, leaving us with 18.063 million employed Canadians. That’s 50.3% of the population in case you’re curious.
Canada’s Labour Force Participation
Canadians Are “Opting Out” of Work
More and more Canadians are becoming non-participants, and “opting out” of working. Although, this may not be as voluntary as the government would like you to believe. After you remove seniors and children, there’s 24.3 million Canadians that could be working. Sure, there’s stay at home parents, and people taking sabbaticals to recharge. Although, 25.6% is a little high considering we don’t have many stay at home parents with 2 kids and one income these days. And let’s be honest, 6.2 million lottery winners and independently wealthy individuals seems like a stretch too.
Millennials Get Shafted…Again
One significant demographic that should be watched closely here is Millennials. No, not because they aren’t being paid enough to live in the two major cities with job growth in Canada. Unemployment for people under the age of 24 looking for jobs is a whopping 13.2%, almost twice the national average. Unfortunately, it’s hard to tell how they do after they hit 25 – we just bulk them in with everyone else up to 65 years of age.
The good news is, that demographic only has a 6% unemployment rate. The bad news is, someone doesn’t hand you a job as soon as you hit 25. This means the rate is most likely skewed to be employed if you’re a Boomer, and less so if you’re a Millennial.
How Does This Impact Real Estate
This crunch on youth will impact homebuyers in a way most people haven’t thought about. Currently in a city like Toronto, the average homebuyer is 36 years of age. This means they likely entered the workforce around the year 2000, when dinosaurs roamed the earth. Way back in 2000, there were 1.305 million people under the age of 25 working full-time. This kept university debt low, and allowed almost 16 years of savings for a down payment on a home.
Fast forward 16 years, that same demographic has 2.1% less jobs, but is 7% larger. Bottom line, there are 326k more people that will need to delay their financial goals by at least 5 years. This would make that 36 year old Toronto buyer at least 41 when they can afford to purchase a home, likely causing a gap of first time buyers. You know, unless we import them – but that would never happen, right?
An increasing number of people “opting out” isn’t just a hit to their bank accounts, it’s a hit to Canada. It decreases the number of people generating maximum economic output, prevents cash flowing through the economy, and doesn’t generate tax revenue for the country. More important, if youth are suppose to be the future, we’re not setting them up to have a very good one.
For the most part, Millennials want to work, but Canada isn’t fostering innovation or industry which creates meaningful employment. Millennials just want the same thing Boomers had when they were younger, full-time, secure employment, with decent benefits, and a high enough pay cheque that they can start a family, buy a home, and save for retirement. Seems like a pretty fair thing to expect.