January 11, 2024
Workers will likely cede more power to employers this year as the labour market continues to cool, but that doesn’t necessarily point to a wave of mass layoffs or even the end of working from home, though much depends on whether Canada plunges into a recession.
The jobs market has come off the boil, having steadily weakened throughout 2023 as high interest rates worked their way through the economy and dampened demand. Just 100 jobs were added in December, Statistics Canada said on Jan. 5, capping off a year in which the unemployment rate rose to 5.8 per cent from five per cent in January 2023.
The bad news isn’t over just yet, economists predict, with forecasts for the year-end unemployment rate ranging from 6.6 per cent, according to the Royal Bank of Canada, to six per cent or more, according to Deloitte Canada.
Just how weak the labour market gets depends on the severity of any economic downturn. The good news is that many economists predict Canada could dodge a severe recession, with economic growth staying flat instead of cratering. Such an outcome means the labour market will remain in relatively good shape throughout 2024, Brendon Bernard, senior economist at jobs site Indeed, said.
“We’re seeing the labour market soften, but from a really strong starting point,” he said. “The hope for (this) year is that even if things continue to soften, as the latest trends suggest, we can at least hold on.”
In other words, workers fretting about losing their jobs in a flood of layoffs might have little reason to worry. A series of headlines about high-profile job cuts in sectors such as technology and banking may have led many to believe 2023 was a bad year for layoffs. Yet, the number of people who lost their jobs remained quite low, Bernard said. So far, it looks as if that trend could persist into 2024. “Absent a real sort of deterioration in the broader economic situation, I don’t see a reason (low layoff rates) wouldn’t continue,” he said.
At the same time, those planning to switch jobs may find the prospect a little more challenging this year. That’s because employer hiring intentions, which also retreated throughout 2023 as high interest rates slowed economic growth, are expected to continue pulling back. Job vacancies fell to 737,500 in the third quarter of 2023 from a record million-plus the previous year, and ads on Indeed have followed suit, Bernard said. “You’ve got job postings … trending back down to earth,” he said. “There’s no real sign that’s going to reverse any time soon.”
But that doesn’t mean strong wage hikes, which have been outpacing inflation, are about to come to an abrupt end. Wage increases tend to lag other economic indicators, Bernard said, so they still have room to run even as the economy weakens. Wage growth remained strong in December, coming in at 5.4 per cent on an annual basis, higher than the 3.1 per cent rate of inflation. Job postings on Indeed point to continued growth on the pay front, with employers for three months through October advertising wages 4.4 per cent higher than last year. “It looks like wages will probably continue to outpace inflation, at least in the near-term,” he said.
Of course, those big pay gains won’t last forever. Eventually, the combination of lower inflation, lower increases in the cost of living and a softer labour market will give hiring managers little reason to offer outsized pay hikes. “That itself is naturally going to put downward pressure on nominal wages,” Bernard said. “It’s just going to take time for that to happen.”
The prospect of eroding worker power may have some remote workers fearing their bosses will call them back to the office for good this year. But that probably won’t be the case, Bernard said. Hybrid work has been gaining strength, and that is expected to continue this year. What’s more, many leaders themselves have become accustomed to working part of the week outside the office, giving them little reason to implement a five-day office mandate. “It’s not just employees who are thinking about the mix between fully remote, hybrid and five days a week in the office,” he said. “There are also managers, who in many cases have similar interests as their staff.”
Other factors, including the pace of population growth, will likely play a role in the strength of the labour market. Bernard said. The uncertainty over just how many people will be living in Canada this year will affect both the labour market and the economy. Another wild card is generative artificial intelligence. AI was quickly adopted across many workplaces last year, and 2024 could be a year when it becomes even more widespread. How that plays out on jobs, especially white-collar ones, is hard to predict, Bernard said. Some jobs may be lost as AI takes hold, but others could be created. That will make AI something to watch as the year progresses.
Still, as long as the economy stays the course, workers can expect a labour market that keeps muddling along, free from massive job losses or big wage cuts. “Overall conditions will likely remain, at least by historic standards, pretty solid,” Bernard said.
