New data shows Canada’s job market is facing a reckoning, and it’s one the country hasn’t seen for decades: there are no longer enough workers to fill the country’s record-high job vacancies.
Canada’s job vacancies hit a record-high in the second quarter of 2022 as employers were unable to fill almost one million jobs, according to a Sept. 21 job vacancy report by Statistics Canada.
Job vacancies were up 4.7 per cent from the first quarter of 2022 and more than 42 per cent year over year. Ontario saw the highest increase in job vacancies up 6.6 per cent from the first to second quarter this year, according to Statistics Canada.
The tight market conditions mean employers have a harder and longer hiring process. In the second quarter of 2022, there were 44 newly hired employees for every 100 vacancies. In comparison, in the same period in 2016 there were 113 new hires for every 100 vacancies, Statistics Canada shows.
Nathan Janzen, senior economist at the Royal Bank of Canada, says an aging population is contributing to the surging vacancies.
“The aging population is certainly one driving factor for high job vacancies,” Janzen said. In August, the number of Canadians who retired jumped almost 50 per cent, from August 2021, according to recent data from Statistics Canada.
Many are retiring baby boomers who hit 65. Others left their profession early due to burn out and insufficient salaries.
Recently, more people in the 55- to 64-year-old demographic retired early, especially those in health care and education professions due to ill-treatment and burn out, said Armine Yalnizyan, an economist and Star columnist and Atkinson Fellow on the Future of Workers.
Many workers in health care and education retired early, as those sectors provide good public pensions, giving more incentive to leave earlier, she said.
In the second quarter of 2022, there were 136,100 job vacancies in health care and social assistance sectors, up 28.8 per hundred year-over-year, which resulted in temporary closures and service reductions in some hospitals, according to StatsCan.
More people are reducing work hours or retiring early to look after aging parents, as home-care and long-term care are “abysmal,” Yalnizyan said, adding thousands are leaving the field due to low pay and long hours.
In addition, because Canada was in a labor surplus for decades before the pandemic, marginalized groups including newcomers, low-income workers, the Indigenous population, as well as those who have disabilities were underutilized, not provided adequate job training or opportunities, she said .
“Maybe we don’t have enough workers for the job market, or maybe we’re underutilizing the Canadians that we have and not optimizing the opportunity for people to participate in the job market,” Yalnizyan added.
Avery Shenfield, managing director and chief economist at CIBC Capital Markets, said there aren’t enough unemployed people relative to the numbers of jobs offered. But, the magnitude of one million unfilled jobs is a result of select sectors being significantly hit during the pandemic, of which many are struggling to recoup their losses.
The hospitality and services industries were hammered during lockdown as workers exited en masse entering more stable and better paying jobs, he said.
On a quarter-over-quarter basis, vacancies in the accommodation and food sector rose 12.7 per cent to 149,600 people. The job vacancy rate in the sector was 10.9 per cent, the highest across all sectors since the summer of 2021, StatsCan said.
“Employers can’t simply hire people who left the profession because it’s been two years. Those workers have moved on and it takes time to train or attract people back to the industry,” Shenfield said. “Major layoffs over a long period of time has long-term impact.”
Another factor driving record-high job vacancies is pent-up demand for goods and services, said Mikal Skuterud, professor of economics at the University of Waterloo.
The tight conditions in the labor market kicked off in the beginning of 2021 when parts of the country were reopening. Pent up demand from people unable to go out and purchase goods, as well as cash flowing into households from government subsidies, created too much demand for travel, food, and entertainment. Simply put, the service and hospitality industries couldn’t keep pace, he said.
“We lose sight of how much stimulus there was, not just wage subsidies but the government poured in over $100 billion into subsidies for employers to hire and retain staff,” Skuterud said. “The number of job seekers before the pandemic hasn’t changed that much, but the demand for goods and services has.”
However, with the Bank of Canada hiking interest rates further, economists predict skyrocketing prices will require people to spend less — quieting down demand — resulting in fewer job vacancies, said Skuterud.
High job vacancies aren’t expected to last long.
BMO forecasts unemployment will rise to 6.6 per cent at the end of next year an increase from 5.4 per cent recorded in August.
“Labour shortage will be less of an issue (at the end of next year) and we’ll see a more balanced job market,” RBC’s Janzen said.
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