MNI INTERVIEW-Canada Job Mkt May Get Even Hotter: Indeed Econ

Canada's record-low unemployment rate could inch down further to provide an even bigger cushion against any hard landing in other parts of the economy, Indeed economist and former finance department researcher Brendon Bernard told MNI.

Low layoff rates, a 70% jump in postings on the job service's Canadian site this year and faster wage gains indicate momentum as the economy faces a potential drag from higher central bank borrowing costs, he said.

“We’re in a bit of an uncertain patch at this point in terms of the recovery, in terms of recession worries and some declines in stock markets,” Bernard said. “Momentum definitely has cooled a bit over the last few weeks, but nothing that really reverses the huge surge in job postings.”

Massive hiring as firms re-opened following Covid shutdowns is unlikely to continue but that kind of moderation wouldn't be the same as a traditional downturn, he said. “If conditions have to slow a bit, there’s still a noticeable difference between normalization and recession.”

SWITCHING TO HIGHER-PAY JOBS

Canada's jobless rate reached the lowest in records back to 1976 in May at 5.1%, down from 6% at the start of the year and the May 2020 peak of 13.4%. Payrolls are about half a million higher than before the pandemic in a nation of 39 million people and wages climbed 3.9% from a year earlier after being previously stuck at a much slower pace.

Wage gains have been building for months and appear well supported by overall conditions, Bernard said. Pay increases haven't been a major source of headline inflation when stacked against rising global prices for goods, housing costs and interest rates, he said.

Workers are also shifting to higher-paying fields following the pandemic, allaying fears expressed by some economists that lockdowns would lead to long-term unemployment or accelerate automation of low-paying jobs.

MONTHS OF GAINS LEFT?

Statistics Canada has similarly tracked an employment shift to higher-wage industries as a driver of pay gains as opposed to incumbent workers getting higher wages, suggesting less trend inflation.

“One of the surprising things about Canada’s job market recovery: the employment rate has been able to fully recover even though employment in some of the most pandemic-exposed industries in the economy, like accommodations and food services, is still well below the pre-pandemic levels,” he said.

“The flip side of the weakness in accommodation and food services, certain other pandemic areas, is really strong growth in areas like professional, scientific and technical services, up 16% versus its pre-pandemic level,” Bernard said.

"Whether the current recovery has a few more good months of solid growth, I wouldn’t be shocked by it.”

Bank of Canada Governor Tiff Macklem has said he wants a soft landing in an economy now working beyond full capacity, but his top goal is bringing inflation back to 2% from today's 6.8%.

Canadian unemployment rate

Source: Statistics Canada