Canadian Job Market Cools: Job Seekers Face New Challenges

For the past few years, Canadian job seekers have enjoyed a strong labour market as employers raced to fill positions amid post-pandemic recovery. Many companies hesitated to enforce office returns, fearing employee departures, and those who left their jobs often found new opportunities quickly, often with better pay.

However, the Canadian labour market is now showing signs of slowing down, making it tougher for job seekers to find and secure employment.

In June, Canada’s unemployment rate increased to 5.4%, the highest in over a year, with more than 1 million Canadians unemployed. This marks a notable rise from the 5.2% unemployment rate reported earlier in the year.

This uptick in unemployment, largely due to more people entering the workforce, signals that competition is intensifying for job hunters. The shift suggests a changing landscape in the labour market.

Wage Growth Slows Down
Economists have been closely monitoring job mobility as an indicator of market confidence. The quit rate has levelled off, reflecting a reduction in job switching, which had surged during the pandemic. Typically, job switchers in Canada would benefit from significant pay increases, but recent data suggests these raises are becoming less substantial.

Recent analyses indicate that pay hikes for those changing jobs have softened, a shift from the high rises seen during the “Great Resignation” period. This trend suggests that the balance of power may be tilting back toward employers, who are less inclined to offer substantial raises to attract new talent.

Longer Unemployment Durations
With hiring slowing down, unemployed Canadians are finding it harder to re-enter the workforce. The median duration of unemployment in Canada has increased, reflecting a broader trend of prolonged job searches.

Recent data from the Employment Insurance (EI) program shows a rise in continuing claims, indicating that more Canadians are staying unemployed for longer periods. This aligns with a broader trend of increased jobless claims, which have reached their highest levels since the pandemic recovery began.

Certain Sectors Cutting More Jobs Than They’re Adding
While overall employment in Canada grew modestly last month, not all sectors saw gains. Industries such as retail and manufacturing experienced job losses, with declines also seen in professional services.

The temporary help sector, often viewed as a bellwether for the broader economy, saw a significant reduction in jobs. This decline in temporary employment could signal future challenges for the Canadian labour market, as companies typically cut temporary roles first when facing economic uncertainty.

As the Canadian job market cools, job seekers may need to adjust their expectations and strategies to navigate this increasingly competitive landscape.