Canada’s job market has finally bounced back to something resembling its pre-pandemic state, and that’s good news.
But it’s too soon to pack up the COVID-19 supports and benefits and call it a day.
The latest job market report from Statistics Canada shows a months-long surge in employment for all sorts of people.
But if the pandemic has taught us one thing, it’s that we can’t count on smooth sailing.
“It’s more complicated to open an economy than to close it,” Bank of Canada governor Tiff Macklem says.
There are sure signs of labour market strength. Mothers and fathers have seen their employment levels return to normal, white collar workers have seen steady gains in employment opportunities, and the arts and culture sector finally bounced back.
There are scars from the pandemic. All told, there are more than 500,000 people who are still searching for jobs, working fewer than their regular hours or temporarily laid off.
Particularly worrisome is the number of people who have been unemployed for so long that their skills may be atrophying and their employment prospects diminishing. Statistics Canada says there are currently 389,000 long-term unemployed people – double the number in February 2020.
But at the same time, tales of labour shortages abound. The Business Development Bank says 55 per cent of Canadian entrepreneurs are having trouble finding the workers they need.
The worker shortage is a perplexing riddle that came up so often on the federal campaign trail that it’s now a bit of an urban legend: the federal government’s COVID-19 supports are luring workers to stay at home, causing labour shortages everywhere.
It makes sense, theoretically, that generous benefits would be a deterrent to low-wage workers to look for work.
But the truth is murkier than that. And it’s important to get to the bottom of it because the re-elected Liberals are about to extend, and possibly tweak, those very supports.
For one, there’s no sign that employers writ large are so short of workers that they’re willing to offer higher pay to attract scarce labour. Wages have risen ever-so-gently over the course of the pandemic and there are no signs of a wage-price spiral that inflation-watchers fear.
Plus, Jennifer Robson, an associate professor of political management at Carleton University, has been tracking the proportion of people looking for work among those available to work, and she’s not seeing any sign of a deterrent effect.
“As far as I can tell, among those without work but willing and available to work, there are currently fewer who are sitting at home and not looking than was the trend before the pandemic,” Robson said.
And in the United States, individual states that have dropped their pandemic supports have seen their employment levels rise a bit more slowly than those states that kept the supports in place.
Back in Canada, Macklem doesn’t blame the government benefits for slowing down the recovery. He says the mismatch between employers who can’t find people and people who can’t find jobs is partly because workers are nervous about public transportation, or their workplaces are unsafe, or they’re dealing with kids in and out of school.
At Indeed, senior economist Brendon Bernard adds a few more reasons to the list. Workers may have built up their savings and don’t feel desperate for any old job, he says. And employers are all trying to hire at the same time and creating a bottleneck.
But he, like Macklem, doesn’t completely rule out that there may be a deterrent effect from pandemic benefits.
Some of those programs expire this month, causing some nervousness among employers. The federal government can extend them for an extra month without Parliament needing to give them approval, and Finance Minister Chrystia Freeland suggested that an extension will be forthcoming.
But as the government figures out whether to buoy up workers and businesses beyond then, they’ll need to make sure they fully disentangle who is coming and going in the labour market first so that they don’t make matters any worse.
Since health policy is akin to economic and fiscal policy these days, they can take some guidance from the Hippocratic oath: First, do no harm.
Heather Scoffield is a National Affairs writer.