Some Canadian employers say they plan to hold onto their workers even if the economy slips into a recession rather than risk not be able to rehire later, which should put a lid on job losses and soften the economic blow of the slump.
Canada’s jobless rate dropped to a record low of 4.9% over the summer and has since edged up to 5.2%. In October, the economy added a net 108,300 jobs, and wages growth climbed to 5.5%, even as the economy began to stall.
The challenge of hiring over the last few months is giving employers pause.
“I don’t anticipate layoffs at all,” said Mark Seymour, CEO of trucking service Kriska Transportation Group in Prescott, Ontario. Up until a few months ago, Kriska’s 1,200 employees were too few to keep up with demand, Seymour said.
Now trucking activity, a leading indicator, has fallen off about 5% from earlier this year, Seymour told Reuters.
Seymour said his company hauls for one major car manufacturer who is expecting to be able to boost production again soon. “They’ve told us to get ready,” Seymour said.
Booming domestic demand has helped keep inflation high in Canada, leading the Bank of Canada to hike its benchmark rate by 350 basis points since March to 3.75%, a 14-year high. Another increase expected in December.
Governor Tiff Macklem reiterated on Thursday that Canada’s economy would slow significantly over the coming months and the jobless rate would rise from historic lows, but said it would not be a severe recession.
“Because the labor market is so hot and we have an exceptionally high number of vacant jobs, there is scope to cool the labor market without causing the kind of large surge in unemployment that we have typically experienced in recessions,” he said.
To be sure, some sectors will be hit harder than others. Tech companies like Shopify Inc (SHOP.TO) have already made cuts and Canada’s tanking housing market will hit real estate, banking and construction workers.
With recession headlines spooking consumers and slowing demand, some companies are looking at scaling back sales functions a bit, said David King, senior managing director for recruitment agency Robert Half.
But overall, demand for professionals is strong. “I think the balance of power still remains with the candidate side of the equation,” King said.
Dennis Darby, who heads Canadian Manufacturers and Exporters business lobby, says there are still some 80,000 vacancies in manufacturing.
“The last thing that any manufacturer I’ve talked to is talking about is laying anybody off,” he said.
ONE MILLION JOBS
Canada has nearly a million open jobs and just over a million unemployed people. Most open jobs are in healthcare and high-contact services, along with skilled-trade heavy sectors like construction and manufacturing.
“The one consistent thing I’m hearing, regardless of where I am – what region, what province – is access to labor,” said Stuart Bergman, chief economist at Export Development Canada. “They’re still looking for workers, and in particular skilled workers.”
As global supply chain bottlenecks dissipate, labor demand will rebound in sectors that have a backlog of orders due to forced production cuts. Carmakers, for example, had to slash output by 25% amid the semiconductor shortage.
“No one is looking at cutting employees, especially because the one thing that we are all waiting for in 2023 is the return of semiconductor supply,” Flavio Volpe, Canada’s Automotive Parts Manufacturer’s Association.
“A lesson we’ve learned in the last few years is if to let people go, they don’t come back.”