Vacancies rise above one million in a tight labor market

The number of employed Canadians is now higher than it was before the pandemic, and the country’s labor force participation rate has recovered in most age groups.Christinne Muschi / The Globe and Mail

Vacancies have risen to an unprecedented number in Canada, the latest sign that employers are struggling to fill positions in an increasingly tight labor market.

In early September, there were just over a million vacancies, Statistics Canada said Thursday. Vacancies rose 16.4 percent – about 143,000 – from August. Employers have never before recruited for so many jobs, according to Statscan figures dating back to 2015.

Nearly one-fifth of all vacancies were in hospitality, which includes restaurants and hotels. The industry’s vacancies – vacancies as a percentage of all jobs occupied and vacancies – were 14.4 percent in September, which is easily the highest in any sector. The national vacancy rate was 6 per cent.

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“We have a big problem when it comes to filling these positions,” said Benjamin Tal, Deputy Chief Economist at CIBC Capital Markets. “This is not something that will be resolved tomorrow.”

Labor shortages have been a key element of the economy since the lifting of pandemic restrictions and shutdowns. The pressure has been acute in low-wage service industries, such as restaurants and retail.

At the same time, Canada’s labor market has risen smartly after the disaster in the spring of 2020, when millions were laid off when the pandemic took hold. The number of employed Canadians is now higher than it was before the pandemic, and the country’s employment rate – the percentage of people either working or looking for work – has recovered in most age groups.

Still, companies want many more workers – and many are struggling to recruit them.

In September, there were 0.83 vacancies for every job seeker, according to an analysis of Statscan data from Mikal Skuterud, professor of work economics at the University of Waterloo. It was the highest ever, and a sign of increasing tightness in the labor market. In BC and Quebec, there were actually more vacancies than jobseekers, Prof. Skuterud found.

The situation has led to some finger pointing. In some cases, employers have blamed the federal government’s pandemic income support for skewing incentives for returning to work. But many workers – such as restaurant servers – say they have moved into industries with better pay and working conditions.

Most of Ottawa’s financial support to businesses and households expired at the end of October, which should have an impact on the labor market. In a recent survey of individuals, the job search site Indeed Canada found that “urgent” job searches increased significantly last month.

Statscan said on Thursday that rising vacancies could be a sign of many developments, including a mismatch between the skills employers want and what is available, along with a reluctance among individuals to accept pay, benefits and the working environment for a particular job.

Despite the employment challenges, wage growth has been rather subdued this year. However, there are signs that it is starting to accelerate. Also, small businesses plan to raise wages by an average of 3.1 percent over the next year, according to survey results released Thursday by the Canadian Federation of Independent Business. This is the highest in surveys dating back to 2009.

The problem is that wage increases are not keeping pace with inflation, which is at its highest in 18 years and erodes households’ purchasing power.

While the recruitment challenges continue, Mr Tal expects wage inflation to rise, thereby increasing the pressure facing the Bank of Canada.

“That’s the number one reason why interest rates will have to rise – to deal with any potential inflation problems here,” he said.

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