New data shows Canada’s job market is facing a reckoning the country hasn’t seen in decades: there isn’t enough labor left 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 nearly a million jobs, according to a Sept. 21 Statistics Canada job vacancies report.
Job openings increased 4.7 percent from the first quarter of 2022 and more than 42 percent year-on-year. According to Statistics Canada, Ontario saw the highest increase in job vacancies, up 6.6 percent from the first to the second quarter of this year.
The tight market conditions mean a more difficult and lengthy hiring process for employers. In the second quarter of 2022, there were 44 new employees for every 100 vacancies. This compares to 113 new hires for every 100 open positions in the same period in 2016, Statistics Canada shows.
Nathan Janzen, senior economist at the Royal Bank of Canada, says an aging population is contributing to rising job vacancies.
“The aging population is certainly a driving factor for high job vacancies,” Janzen said. In August, the number of Canadians retiring increased nearly 50 percent from August 2021, according to the latest data from Statistics Canada.
Many are retired baby boomers who have reached the age of 65. Others left their jobs prematurely due to burnout and inadequate salaries.
More recently, more people in the 55-64 age group were taking early retirement due to abuse and burnout, particularly in health and education occupations, said Armine Yalnizyan, an economist and Star columnist and Atkinson Fellow on the Future of Workers .
Many workers in healthcare and education took early retirement because those sectors offer good public pensions and more incentives to leave earlier, she said.
There were 136,100 vacancies in the health and social services sector in the second quarter of 2022, up 28.8 percent year-on-year, prompting temporary closures and benefit cuts at some hospitals, according to StatsCan.
More and more people are reducing their working hours or taking early retirement to care for aging parents. since home care and long-term care are “miserable”, Yalnizyan said, adding that thousands are leaving the field because of low wages and long hours.
Because Canada was in a labor surplus for decades prior to the pandemic, marginalized groups, including newcomers, low-income workers, Indigenous people and people with disabilities, were underutilized and lacked adequate job training or opportunities, she said.
“Maybe we don’t have enough workers for the job market, or maybe we’re not taking advantage of the Canadians we have and not optimizing opportunities for people to participate in the job market,” Yalnizyan added.
Avery Shenfield, executive director and chief economist at CIBC Capital Markets, said there are not enough unemployed relative to the number of jobs available. However, the magnitude of one million vacancies is the result of select sectors that have been significantly hit during the pandemic, many of which are struggling to recoup their losses.
The hospitality and service industries have been hammered during the lockdown as workers exited en masse and entered more stable and better-paying jobs, he said.
In a quarterly comparison, vacancies in the accommodation and catering sector rose by 12.7 percent to 149,600 people. The job vacancy rate in the industry was 10.9 percent, the highest in any industry since the summer of 2021, according to StatsCan.
“Employers can’t just rehire people who left the profession because it’s been two years. Those workers have moved on and it takes time to train people or get people back into the industry,” Shenfield said. “Large layoffs over a long period of time have long-term effects.”
Another factor driving record job vacancies is pent-up demand for goods and services, said Mikal Skuterud, a professor of economics at the University of Waterloo.
The tense situation in the labor market began in early 2021 with the reopening of parts of the country. The pent-up demand from people who cannot go out and buy goods, along with money pouring into homes from government subsidies, has led to over-demand for travel, food and entertainment. Put simply, the service and hospitality industries are not keeping pace, he said.
“We’re losing sight of how many incentives there have been, not just wage subsidies, but the government has poured over $100 billion into subsidies for employers to hire and retain employees,” Skuterud said. “The number of job seekers didn’t change that much before the pandemic, but the demand for goods and services did.”
However, as the Bank of Canada continues to raise interest rates, economists predict skyrocketing prices will force people to spend less – which will calm demand – leading to fewer job openings, they said Skuterud.
High job offers are not expected to last long.
BMO forecasts that unemployment will rise to 6.6 percent by the end of next year, up from 5.4 percent in August.
“Labor shortages will be less of an issue (end of next year) and we will see a more balanced labor market,” said RBC’s Janzen.