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Mild Conditions Prevail in February’s Labour Market

Canadian Economics

By: Liam Daly

  • The Canadian economy added 41,000 jobs in February. For the twelfth consecutive month, labour force growth outpaced job growth. As a result, the unemployment rate increased, rising to 5.8 per cent, offsetting the previous month’s decline. Job growth was concentrated among self-employed workers with little change in the number of public and private sector employees.
  • Among the goods-producing industries, employment growth in construction (10,500) was outweighed by declines in manufacturing (–13,900) and agriculture (–6,000). In the service economy, overall employment rose, supported by gains in accommodation and food services (26,200) and professional scientific and technical services (+17,900). These outweighed losses in wholesale and retail trade (–16,800) and educational services (–17,000).
  • Across Canada employment growth was concentrated in just 2 of 10 provinces. Gains were recorded in Alberta (+17,000) and Nova Scotia (+6,300). A decline was recorded in Manitoba (–5,300). In the remaining provinces, employment was essentially unchanged.
  • On a year-over-year basis, the pace of average hourly wage growth slowed to 5.0 per cent in February.

Key Insights

Labour market momentum continues to feel the squeeze under the weight of higher interest rates. Job growth is weak, and labour force participation rates have slipped. Yet thankfully, signs of stress in the labour market remain relatively muted. Layoffs have not surged, and the increase in the unemployment rate over the last 6 months has been relatively modest. With excess labour demand trimmed, today the job market finds itself on a more balance footing compared to a year ago. Job vacancies have returned to pre-pandemic levels and the intense competition for workers, that prevailed after the pandemic reopening, has eased. Less competition for workers and normalizing inflation expectations should allow wage growth cool in the months ahead.

Younger workers are shouldering the weight of a weaker labour market. Over the last year, labour force participation rates among younger workers have fallen more sharply than among core-aged and older workers. Last month, female youth participation rates reached the lowest level in over two decades (excluding periods of public health restrictions). Our Canadian Hiring Index reveals that online job postings among professional, scientific, and technical services and financial and insurance services, key industries for university graduate recruitment, are today well below pre-pandemic levels.

Recently released population data, disaggregated by age, shows international migration is helping to slow population aging. In the year leading up to July 1, 2023, Canada’s working age population unusually expanded, and the average age dipped slightly, the first decrease since 1958, reflecting large inflows of newcomers to the country. Millennials became the largest generation in the population, displacing Baby Boomers for the first time in 65 years. In the coming years, international migration is expected to weaken as inflows of temporary residents slows. While historic levels of international migration may temporarily slow population ageing, this demographic trend is unavoidable. In 2023, the number people aged 65 years and older surpassed the number under 18 for the first time in Canadian history. Population aging will continue to be a dominant force in Canada’s labour market in the years ahead.

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