Job vacancies excessive, however unemployment to slam some job sectors subsequent yr, economists warn

Canadian job vacancies stay far above pre-pandemic ranges, however economists paint a extra dire image for staff, warning that unemployment will rise considerably in sure job sectors.

Employers had been actively searching for to fill 959,600 vacant positions within the third quarter of 2022, down 3.3 per cent from the second quarter which reached a file excessive of 992,200 vacant positions, Statistics Canada reported on Dec. 19.

The variety of vacancies within the third quarter remained elevated in comparison with final yr — it was 8.3 per cent larger than in the identical quarter in 2021. It was 72.7 per cent larger than within the first quarter of 2020, instantly earlier than the pandemic.

“Job vacancies is likely to be down barely from quarter to quarter, however from the massive image view we’re nonetheless up considerably from a yr in the past,” mentioned Douglas Porter, chief economist and managing director of BMO Monetary Group. “There’s nonetheless loads of demand in some industries for staff.”

The ratio of job vacancies to unemployment was nearly equal, which means there was round one unemployed particular person for every unfilled place. Pre-pandemic it was six unemployed individuals for one job emptiness.

Now staff have extra energy within the job market and might demand higher pay and dealing situations, mentioned David Macdonald, senior economist with the Canadian Centre for Coverage Alternate options.

There’s a direct correlation between job vacancies and wages, he mentioned — the decrease the pay, the extra vacancies there are. Total, the typical hourly wage elevated by 7.5 per cent year-over-year, which partially stems from older staff retiring from lower-paid jobs and youthful staff coming into the workforce with higher-paid ones.

Lodging and meals companies, which traditionally report excessive job vacancies, elevated wages, which helped the sector retain or rent staff — job vacancies had been down 6.5 per cent from the second to 3rd quarter however remained elevated at 10 per cent, the very best price amongst all sectors.

“One resolution to enhance job vacancies is to pay individuals extra,” Macdonald mentioned. “In some sectors it’s not a employee scarcity however a wage scarcity. Employers pay extra, they’ll fill extra positions.”

Nonetheless, some sectors face a major employee scarcity. Well being care and social help reported record-high job vacancies, up 9.5 per cent from the second to 3rd quarter. Nursing vacancies dominated their sector, as nurses continued to depart the career.

“Well being care is getting worse,” Macdonald mentioned. “It’s one of many extra regarding sectors as a result of there are legitimately not sufficient staff.”

Wages within the sector elevated by six per cent over the course of the yr, nonetheless lagging behind inflation, which is sitting under seven per cent.

Different sectors carried out higher, corresponding to skilled, scientific and technical companies, significantly with corporations providing IT jobs and companies, in addition to manufacturing, retail commerce, and finance and insurance coverage.

However elevated job vacancies in Canada are appearing as a buffer for the inevitable job losses anticipated in 2023 with many economists forecasting a recession, mentioned Benjamin Tal, CIBC Capital Markets managing director and deputy chief economist. Dropping vacancies are seen as the primary sign, with rising unemployment rapidly to comply with.

“Proper now what we’re beginning to see is a scenario the place workplaces cease hiring however they don’t fireplace anybody,” Tal mentioned. “That’s the very best end result. However we nonetheless haven’t seen the complete influence of excessive rates of interest.”

The Financial institution of Canada raised its in a single day lending price seven instances this yr to assist cool inflation, and charges are anticipated to stay elevated or improve additional within the new yr as inflation stays “sticky” — which means it’s not dropping quick sufficient, because of supply-chain points and geopolitical tensions in Europe driving up items and power costs.

In a decent labour market, wages sometimes improve, giving staff have extra buying energy, which partially fuels inflation. The central financial institution needs to push unemployment charges to tame inflation, economists say.

“If rates of interest go larger or stay excessive, it’s going to influence unemployment. The Financial institution of Canada needs unemployment to achieve six per cent, proper now it’s at 5.1 per cent,” Tal mentioned.

Porter agrees that unemployment will rise, however solely in sure sectors. One is as lodging and meals companies, which has completely misplaced pre-pandemic staff to different better-paying sectors. One other is manufacturing, as a result of as soon as a recession hits the U.S. its commerce with Canada will reduce.

Tech jobs are additionally on the chopping block, with a sequence of mass layoffs in latest months, which Porter believes will proceed in 2023.

The unemployment price may not rise as a lot as earlier financial downturns, Porter mentioned. However that received’t be the case throughout all industries.

“Sure sectors can’t get staff again as a result of they moved on within the pandemic, so vacancies will drop in a short time in some sectors,” Porter mentioned. “In a yr we’ll see a lot decrease emptiness numbers, in flip inflicting larger unemployment.”

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