“The unemployment rate can be misleading in times of economic crisis. It can sometimes mask the temporary withdrawal of some workers from the labour force and thus overstate an improvement. True but this is not the case in Canada today, as evidenced by a labour force participation rate that, unlike that of the United States, has essentially returned to its pre-pandemic level.” (Matthieu Arseneau and Kyle Dahms, National Bank Financial, December 3, 2021) 

Despite the evidence of serious employment shortages, Canada has experienced an unusually strong pace of job creation over the past three months. 

Indeed, although the labour force survey data are somewhat erratic, over the past three months Canadian employment expanded at a monthly average of 114,000, an extremely strong rate of employment growth.

And in November Canadian employment surged by 154,000 (+0.8%) and was 186,000 (or 1%) higher than its pre-COVID February 2020 level. 

In November there were huge gains in both full and part-time employment. And most interestingly given the labour shortages which were triggered by the pandemic, there was also a massive 127,000 expansion of jobs in Canada’s service-producing sector. 

As is also the case in the United States, money wages have been creeping up in Canada, though the November twelve-month gain of 4.9% hardly kept up with the 4.7% year-over-year increase in the October consumer price index. 

The Canadian unemployment rate also fell to 6% last month, which was only 0.3 percentage points above its February 2020 level. The comparable spread in the US case was a steeper 0.7 percentage points. 

The total number of unemployed in Canada declined to 1.24 million in November but remained 98,000 above its February 2020 pre-pandemic level.

Even with the recent strong progress on job growth, Statistics Canada reported that the unemployment rate would have been 7.8% in November had it included Canadians who wanted to work, but didn't search for a job. 

As well, in November the number of Canadians unemployed for 27 weeks or longer declined by 62,000 (or 16.2%), the first monthly decline in long-term unemployment since August 2021.

As the data in the following charts illustrate, there has been some significant differences in the jobs recovery in Canada compared to the US. 

In both countries the recovery has reduced the unemployment rate, though as recently pointed out above, Canada is closer to its pre-pandemic low unemployment rate than is the US. Canada’s labour force participation (LFP) rate has also returned to its pre-pandemic level, whereas in the US, labour participation is still quite depressed. 

Finally, Canada seems to have restored all of the jobs lost in the pandemic somewhat earlier than the US.  

In closing, the fact that Canada’s job market has clearly improved in the current environment of high inflation and a hot housing market almost guarantees that the Bank Of Canada will start raising its policy interest rates early next year.