Job growth 'not fast enough to keep up with growth in the labour force as the population continues to rise rapidly'
Canada’s labour market continues to struggle with rising unemployment and a cooling hiring environment, according to a recent report from the Royal Bank of Canada (RBC).
Employment in Canada is projected to have increased by just 10,000 jobs in November, while the unemployment rate is expected to climb to 6.7 per cent, up from 6.5 per cent in October, according to the report.
However, this modest growth comes as job creation fails to keep pace with the rapidly expanding labour force.
“Canada has steadily posted job growth, but not fast enough to keep up with growth in the labour force as the population continues to rise rapidly,” says RBC. “The past two months were an exception – the unemployment rate ticked lower for the first time since January in September and held at that level in October – but largely because of a sharp pullback in the share of, particularly younger, workers giving up their job search.”
There is an urgent need for the federal government and other stakeholders to address the problem of youth unemployment in the country, according to a previous report. Overall, Canada’s failure to address its youth unemployment crisis will cost the country $18.5 billion in GDP by 2034, find Kings’ Trust and Deloitte.
Overall, the unemployment rate remains nearly one percentage point higher than it was a year ago, according to RBC.
RBC attributes this stagnation to slowing hiring demand, noting that job vacancies fell by 18 per cent year-over-year as of September, based on data from the Survey of Employment Payrolls and Hours.
However, RBC expects a partial recovery in the labour force participation rate, which dropped by 0.3 percentage points over the last two months.
Job market: Canada versus US
While the job market in Canada faces troubles, the scenario in the U.S. is much better, according to RBC.
RBC projects U.S. payroll employment to jump by 157,000 jobs in November, recovering from October’s modest gain of 12,000. The October figure, the smallest since the pandemic, was skewed by temporary disruptions from hurricanes and labor strikes.
The U.S. unemployment rate is expected to hold steady at 4.1% in November for the third consecutive month. While this rate is slightly higher than 3.7% a year ago, it is still below the summer peak of 4.3%.
However, beneath these headline numbers, the U.S. labour market is showing subtle signs of cooling. “Job openings have continued to fall, and quit rates are at their lowest level since 2020,” RBC states.
Interest rate cuts
The employment data from both countries will be a key factor in upcoming monetary policy decisions by the Bank of Canada (BoC) and the U.S. Federal Reserve, according to the report. RBC notes that the Canadian labour market’s underperformance, coupled with easing inflation pressures, is likely to prompt deeper interest rate cuts from the BoC compared to the Federal Reserve in 2024.
“We continue to expect deeper interest rate cuts will come from the BoC than the Fed in the year ahead, reflecting substantial and persistent underperformance in Canadian economic growth,” the report explains.
Recently, various groups called on the federal government to take decisive action following US president-elect Donald Trump’s threat of imposing punishing economic sanctions against Canada.
