Employment rises as Canada’s labour force shrinks slightly

While Canada is seeing an uptick of employment and a slight decline in unemployment, the domestic labour market continues to shrink. (File Photo: Marten Bjork/Unsplash)

The national unemployment rate fell by 0.2% to 5.2% in September. Statistics Canada’s September Labour Force Survey revealed positive trends in the labour market around employment, while concerns loomed in the background regarding an aging population and ever-increasing retiree exits from the workforce.

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Employment increased in British Columbia, Manitoba, Nova Scotia, New Brunswick, Yukon, and Nunavut in September; while Ontario, Prince Edward Island, and the Northwest Territories saw slight declines. Among Canada’s+ core-aged population (25-54), employment increased for women (+0.8%) and remained steady for men in the same age demographic. These remain largely positive signs for general economic performance, as well as the strong hiring climate Canada is experiencing currently.

Gains in employment for educational services and health care and social assistance services were offset by losses in manufacturing, information, culture, and recreation, transportation and warehousing, and public administration. Increases in service sector industries reflect an increase in spending in these areas post-pandemic, which has aided a continued return toward pre-pandemic business levels.

Furthermore, people looking for work in Canada were spending less time unemployed, with a sharp decline of 9.7% (18,000) in long-term employment (the number of people who have been continually unemployed for 27 weeks or more).

This is yet another encouraging sign of a strong hiring climate. The need to continually address an inflated number of job vacancies, as seen since July, will remain of primary concern to the national labour market. Though these remain strong signs for economic performance and highlight opportunities within Canada, there are also some longer-term trends that are not as positive.

Labour force contraction

September saw a decrease in both the total size of the labour force (the total number of people employed or unemployed) by -0.4% and a decline in the participation rate of -0.1%. These declines are consistent with monthly and yearly trends that highlight the need for continued labour recruitment in Canada. Since 2002, the national labour force participation has declined by 2.4% cumulatively.

These measures remain extremely pertinent in the face of high job vacancies, and an aging population; the latter a significant domestic problem that Canada must continually address. However, in the face of yet another trend the decline becomes even more relevant:

In September, nearly one million people between 55-64 cited retirement as their main activity. Related to an aging population, increasing numbers of people in the workforce continue to pursue retirement, driving Canada’s labour force down.

As more of Canada’s working population reaches retirement age (since 2019 the number of Canadians aged 65+ grew by 11.6%, while the growth in the population of people of working age was only 3.5%), and in the face of vacancies and labour market contraction, Canada will have to take increasing measures to make sure that it does not experience a severe labour shortage and can still attain its economic and fiscal goals.

The importance of foreign workers

In the face of a labour market with high vacancies, a shrinking labour force, and an aging population—one government activity will be paramount to Canada’s ability to maintain economic growth and health: immigration.

As more of the population continues to reach or approach retirement age; coupled with a low fertility rate, it is clear that Canada cannot replenish the labour pool through natural growth. The government will instead look to address labour and skills shortages in the market through its immigration programs, (already seeing increases in Gen-Z and millennial workforce).

In the face of shortages (seen for example, in the healthcare and social assistance industry) Immigration Refugees and Citizenship Canada (IRCC) are looking to welcome a record 430,000 new immigrants annually.

The Canadian Government will additionally announce its immigration levels plan 2023-2025—the umbrella plan for newcomer strategy—by November 1st.

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