Canada’s labour market is still fundamentally weak, despite reporting its first employment gain of the year, economists say.
Statistics Canada reported a gain of 14,000 jobs in March, ending a two-month losing streak while keeping the unemployment rate steady at 6.7 per cent.
“The labour market seems to be frozen,” says Dominique Lapointe, director of macro strategy at Manulife Investment Management.
He says that with labour supply slowing and labour force growth stalled due to immigration changes, the balance of conditions in the Canadian economy has remained much the same for over a year.
“There’s very little new people coming in,” says Lapointe. “There was a big rebound in their participation post COVID, but that has been exhausted more or less.”
While the job gain numbers are a huge relief from the 84,000 job loss in February, this is still not a job seekers market, says Brendon Bernard, senior economist at Indeed.
“There’s all the challenges that have built up for Canadian workers looking for new jobs, looking to get into the labour market, youth unemployment,” says Bernard.
“These all persist.”
Public sector holding the hiring market together
Lapointe notes that “material slack”, or excess capacity, is partly caused by U.S. tariffs on selected industries.
The largest employment decline among industries was in manufacturing, according to the report which shows a loss of 44,000 jobs compared to last March.
“Even on the services side there’s some slack… jobs like retail and wholesale were also down, which is even more concerning,” says Lapointe.
He says the public sector appears to be holding the hiring market together right now and the only sectors that showed strength over the last year are public administration, healthcare, social assistance, education, and professional and technical services.
“Public sector jobs growth has slowed, so they’re not hiring as much, but the governments are still hiring,” says Lapointe.
There was little change in the number of full-time and part-time workers in March, which shows how volatile those job numbers can be, says Bernard.
Wage growth is consistent with inflation
A 3.5 per cent wage growth is consistent with inflation being close to two per cent, says Lapointe.
“So we don’t see the current wage pressure being conducive to more inflation, and would force the Bank of Canada to react,” he says.
“A lot of those wage pressures also go back to concessions made to union employees and to public sector employees to offset some of the inflation of 2021 and 2022. That’s still filtering through.”
But now affordability may change with Canadians facing higher prices because of the war in Iran, says Bernard.
“The purchasing power of Canadian workers is going to be under pressure,” he says.