Why Canada’s job losses aren't cause for panic — yet (unless you’re 22)

“Bloodbath” was how one labour analyst quoted by BNN Bloomberg described

Canada’s latest jobs report.

The country lost 84,000 positions in February, driven in large part by Quebec, which saw 57,000 layoffs. One Desjardins report looking at Quebec called it the largest non-pandemic employment decline in the province in at least 50 years.

The figures, however, may be less alarming than they appear.

The labour force survey — the monthly jobs report produced by Statistics Canada — is based on a sample of households. That means there can be swings in the numbers from one month to the next. It doesn’t necessarily reflect the underlying economy. Economists call this “noise.”

That Desjardins report highlighting Quebec’s dramatic employment decline reached a more measured conclusion at the end: “One month does not make a trend, but it certainly knows how to grab attention.”

Fabian Lange, a professor of economics at McGill University who holds the Canada Research Chair in Labour Economics, also cautioned against reading too much into a single month’s data.

“Things are fine … currently,” he said, summarizing the data.

Quebec helped drive Canada’s rising unemployment rate

These are not the kind of layoffs that usually signal a recession or broader trouble, Lange said, but several uncertainties remain a cause for concern.

“I see declines in hiring,” he said. “Companies are hiring fewer new employees, but there are no large layoffs, which means the unemployment rate is only slowly moving up.”

But, he added, several conventional indicators suggest the labour market and the broader economy remain strong: wages are up, unemployment by historical metrics is still low, and the employment rate is high.

“Wage growth is actually pretty decent,” Lange said.

In other words, even if hiring has slowed, companies are still raising pay to keep the workers they already have.

“The Canadian economy is part of the North American economy, and there’s been this guy sitting in Washington basically doing his best to screw it up,” Lange said.

Even so, he says the labour market has proved resilient in recent years.

“If you think back to COVID, there was a short, sharp downturn in the labour market, and then a very rapid, very robust recovery,” Lange said.

Still, there remains several underlying forces shaping the labour market — one of them demographic change, he said.

More Canadians are moving into retirement age, meaning a larger share of the population is no longer working, which lowers the overall employment rate. Many people in their late 50s and early 60s are also staying in the workforce longer than previous generations.

“These two trends are kind of holding the balance, almost,” Lange said.

Why hiring is slowing

If layoffs aren’t the problem, the bigger shift in the labour market appears to be a slowdown in hiring, Lange said.

“We are in a period of profound uncertainty,” he said.

Trade tensions with the U.S. are part of the picture. Global conflicts and economic policy shifts are also making companies cautious.

Then there is rapid technological change.

“I think we’re also in a period of technological uncertainty,” Lange said. “Firms are not sure how the emergence of AI, of large language models affects the work that they have to do, and so they are holding back with hiring.

“You don’t want to hire somebody and train somebody for a job that you’re not sure they need to be trained for two years down the road,” he said.

Time to rethink entry-level jobs

This slowdown in hiring tends to affect younger workers first, because they are the ones trying to enter the labour market.

Among Canadians age 15 to 24, the unemployment rate rose 1.3 percentage points to 14.1 per cent in February, as employment for this group fell by 47,000 jobs.

In his analysis, Brendon Bernard, senior economist at the job site Indeed, wrote: “Youth employment rates in particular have fallen back to their September levels after bouncing up toward the end of the year.”

“Young people are having a hard time finding a job,” Lange said. “People leaving college, leaving high school and entering the labour market are taking longer than usual to find their first employment.”

Part of the reason may be older workers are staying in their jobs longer, while companies are adding fewer new positions.

“I wonder to what extent entry-level positions have to be rethought, generally,” Lange said.

The risk ahead

For now, economists say the labour market appears to be softening, though the outlook could change quickly if a new shock hits while hiring is already weak.

“It’s the future. We don’t know,” Lange said.

“I do worry that if there is an event like a war in the Middle East, or a crisis in some part of the financial sector … that suddenly leads to layoffs … unemployment can pretty quickly build up.”

“So yes, I think concern is warranted.”

What do you think about the latest jobs report? Write to me at hnorth@postmedia.com