Canada’s Job Market Recovered A Bit Faster Than America's, But It's Still Not Healthy

According to BMO Economics:

“Canadian employment rose by a hearty 157,100 in September versus expectations of a 60,000 gain and a 90,200 advance in the prior month. The robust reading pulled total employment just above the pre-pandemic high, marking a watershed moment in the recovery—the economy has now recouped the entire 3 million jobs lost in the spring of 2020. The recovery, while clearly bumpy at times, took a mere 17 months, which frankly was undoubtedly much faster than almost anyone would have dared predict in those dark days.” 

As of September 2021, Canada’s economy finally recovered the 3 million jobs that it lost because of the pandemic downturn. Indeed, as one of the following charts illustrates, Canada’s current jobs recovery - and even the general economic recovery - has been faster than recoveries from previous economic recessions. Nonetheless, all is still far from well on the economic and jobs front. 

For example, the actual employment rate was 60.9% in September, 0.9 percentage points lower than it was in February 2020. On a somewhat brighter note, the labor force participation rate was 65.5% in September, matching the rate that existed in February 2020.

However, it should be remembered that over the past year and a half Canada’s population and its potential labor force continued to grow. So, if we simply assume that employment could have been roughly 1.5% to 2% higher than this September’s level had there been no pandemic downturn, then one must also conclude that all is still far from perfect in the Canadian job market.

Of course, there still is the striking observation that, on a comparative basis, Canada’s job creation in September pulled a bit ahead of the US and the US still hasn’t replaced all of the jobs it lost in the pandemic.

In Canada, the economy recovered 157,000 (net) new jobs in September, sharply above the 94,000 growth in August. Even though the unemployment rate fell to 6.9% in September from 7.1% in August, Canada’s unemployment rate is still substantially above the 5.7% rate that prevailed back in February 2020, the date which economists usually mark as the beginning of the pandemic recession.

As well, the recovery from the pandemic recession is still triggering some surprising and uneven developments in Canada’s labor market. For example, in September of 2021, employment in the services sector surpassed its pre-COVID-19 high, while employment in the goods-producing sector remained 3.2% (or 128,000) below its February 2020 level. Total hours worked was also 1.5% below its pre-pandemic level. 

Finally, Statistics Canada reported that the number of people working from home has been shrinking and fell to 4.1 million in September, down from 5.1 million in April 2020.

In closing, the relatively strong finish to employment in the third quarter provides the Bank of Canada with a fairly strong rationale for monetary tapering to soon begin. The Fed’s tapering signal in the US is a bit more muddled, as the American employment picture is still somewhat disappointing.