As most incoming economic indicators point to a slowing economy, the labour market is gradually following suit.
Nationally, job creation still looks quite healthy. The total number of jobs continues to advance at a respectable pace and year-over-year employment growth is still running at 2.5 per cent.
The number of employees in Canada’s private sector is up nearly three per cent year over year, and hiring activity in the public sector has finally moderated from its unsustainable five-plus-per-cent annual increases to a more typical 1.5-per-cent pace.
But even as employment gains hold up, there are signs conditions in labour market are shifting. Notably, the Canada-wide unemployment rate has edged up from five per cent to 5.7 per cent over the past year. The elevated job vacancy rate – frequently cited as evidence of the once exceptionally tight labour market in late 2021 and well into last year – has fallen from 5.2 per cent to 3.8 per cent over the past 12 months.
Meanwhile, in B.C. the economic indicators are also softening, including retail sales, exports, new building activity and residential home sales. But the job market here has weakened much more quickly than elsewhere in the country. Since last fall, total employment growth has slowed from around three per cent to just 1.7 per cent. More worrying, private sector employment is declining outright.
Last October, B.C. had 1.782 million private sector payroll jobs; today, we have 1.772 million – 10,000 fewer. This has occurred during a period when the population and the labour force have been expanding briskly – in the latter case, by roughly 150,000 people since the start of 2022. In contrast to the rest of Canada – where the recent moderation in public sector hiring means the private sector is now the main driver of aggregate employment gains – in B.C. the only reason overall employment has managed to eke out any gains over the past year is because of a 5.5-per-cent surge in public sector hiring.
Consistent with the national picture, the unemployment rate has also climbed higher, but in B.C. it has jumped a full percentage point from 4.4 per cent to 5.4 per cent since late 2022. Recent months have brought a string of high-profile layoff announcements affecting industries like banking, insurance, telecommunications, retail, publishing and printing, and parts of the tech sector. The province’s job vacancy rate has trended steadily lower over the past year from 5.8 per cent to 4.2 per cent. Indeed, the overall job vacancy rate in B.C. is now lower than it was prior to the pandemic back in 2019. The Canada-wide job vacancy rate has also moved lower, but is still higher than it was back in 2019 reflecting the stronger sustained demand for labour elsewhere in the country.
Looking ahead, there is ample reason to believe labour market conditions will continue to deteriorate. Higher interest rates are hammering consumer spending and demand, which in turn slows hiring. Against the backdrop of fewer private sector jobs, employment in B.C. will be weighed down by the imminent completion of a handful of large capital projects that collectively represent over $100 billion of construction spending over the past six to seven years. This points to a decline in construction-related employment in 2024.
At the same time, B.C.’s forest sector is still contracting, new home construction is decreasing and most segments of the province’s manufacturing sector continue to struggle.
The difference between the national job market and B.C.’s is already quite jarring. And the near-term outlook for job creation locally is uninspiring. Considering the evident weakness in B.C.’s job market and the fact that employment is a lagging indicator, if the Bank of Canada were setting monetary policy for B.C. alone, it would probably now be poised to start trimming its short-term policy rate that currently sits at five per cent. But much stronger job markets in all other parts of the country, plus continued government fiscal stimulus, means the central bank’s “higher for longer” policy stance may be appropriate at the national level but will increasingly be out of alignment with the prevailing economic and job market conditions in B.C.
Jock Finlayson is chief economist of the Independent Contractors and Businesses Association. Ken Peacock is the Business Council of British Columbia’s senior vice-president and chief economist.
