Despite the recent apparent good news from Canada’s Labour Force Survey for August 2024, showing an increase in a net total of 22,000 jobs, some underlying trends behind those numbers raise concerns about the Canadian labour market.
Job creation has stalled and unemployment figures continue to rise, as immediate and more long-term economic pressures suggest Canada’s labour market could face considerable challenges as it moves through the latter part of 2024 and into 2025.
Stalling Job Creation and Rising Unemployment
Although there was a net increase of 22,000 jobs, full-time employment dropped by 44,000 – the largest single-month decline in the last two years – while part-time employment increased by 66,000. According to a September Edge Realty Report, this marks a notable shift in the job market, where for the first time since the pandemic, the annual growth rate of part-time jobs exceeded full-time employment, with 184,000 part-time jobs added compared to 132,000 full-time positions.
The recent shift from full-time to part-time employment has hidden the concerning drop in full-time positions, as employers demonstrated a hesitancy to commit to long-term full-time hires, looking instead for part-time workers to maintain flexibility in their staffing. This results in a loss of greater job security, better benefits, and higher wages generally associated with full-time employment. The switch to part-time work could also put downward pressure on wage growth in the longer term, as part-time positions typically offer lower hourly rates than full-time roles.
The unemployment rate also rose to 6.6% from 6.4%, which, while moderate, reflects deeper issues in the labour market. More critically, the number of Canadians unemployed for 27 weeks or longer surged by 85% year-over-year. This rise in long-term unemployment indicates that while layoffs have not occurred en masse, individuals who do lose their jobs are finding it increasingly difficult to re-enter the workforce.
Also noted in the September Edge Realty report, over the past six months, the number of unemployed has increased by 15%; other than during the pandemic, the last time an increase of this level was seen was in 2009. This increase in unemployment and the lack of job creation has reached troubling levels. Canada’s Sahm Indicator, a key metric that tracks the three-month change in the unemployment rate, rose to 97 basis points. Historically, this level has been an accurate predictor of recessions.
Long-Term Unemployment on the Rise
Another troubling aspect highlighted in the September Edge Realty Report is the rise in long-term unemployment. Long-term unemployed individuals—those out of work for 27 weeks or longer—are increasing at an alarming rate. Over the past year, this group has grown by 85%, signalling a deeper issue in the labour market. Once individuals find themselves unemployed for an extended period, it becomes significantly more challenging for them to re-enter the workforce, due to factors such as skill deterioration, a potential mismatch between their skills and the available jobs, and the stigma often associated with long-term unemployment.
In August 2024 alone, the number of long-term unemployed rose significantly, contributing to the broader rise in unemployment. This is a concerning trend as long-term unemployment often leads to social and economic challenges, such as increased reliance on government assistance, heightened poverty rates, and a negative impact on overall consumer confidence.
While outright layoffs have not yet occurred on a large scale, several indicators suggest that Canada could be at the beginning of an employment downturn. Employers typically curtail hiring before initiating layoffs, and the stalling of job creation may be a precursor to more significant cuts in the near future. A weaker labour market also tends to reduce consumer spending, which could, in turn, further slow down the economy.
