Yahoo Finance Posthaste: Canada's labour crunch won't end with a recession, report says
Good morning!
Canada’s job market has not been this tight in decades, and according to a new RBC Economics Research report, this labour crunch would outlive a recession.
The country’s historic worker shortage is affecting just about every industry across every sector. It is now limiting over half of Canadian businesses from increasing production compared to 40 per cent before the pandemic and 30 per cent a decade ago, said the report by RBC economists Nathan Janzen and Claire Fan.
Canada had nearly 70 per cent more job openings in June 2022 than before the COVID-19 pandemic. At the same time, there were 13 per cent fewer unemployed workers than in February 2020, the report said.
The Bank of Canada has been trying to slow down increased demand with aggressive interest rate hikes. The central bank is expected to raise rates to 3.25 per cent by October, which RBC says is enough to push the economy into a moderate recession in 2023.
The recession will bring the unemployment rate up to 6.6 per cent from the 4.9 per cent seen in June, the report says. But while this will reduce the pressure on companies struggling to hire in the near-term, it does not address the root of the country’s labour crunch, the economists said.
The report noted that the scarcity of labour in Canada predates the COVID-19 pandemic. In fact, it began over a decade ago when the country’s massive baby-boom generation started to reach retirement age (65 and above).
The aging population alone has significantly reduced the share of the population that is actively working or looking for work and Canada is only about halfway through that generation of labour-force exits. The report estimates labour-force participation will drop to levels not seen since the 1970s by the end of this decade.
In addition, the number of people born in Canada is set to decline on a yearly basis by 2030 due to decades of low-birth rates. That’s why Canada’s economy needs an influx of immigrants and a focus on skills matching, said the economists.
The report noted that 82 per cent of immigrants have completed post-secondary education compared to only 76 per cent of the population born in Canada. Yet, newcomers are 43 per cent more likely to work in jobs where their education level is not required compared to their Canadian-born counterparts.
The authors of the report said that putting newcomers’ skills to work and integrating this talent into the Canadian workforce is crucial to boosting productivity.
Increasing capital spending can also improve productivity, the report said. For example, more affordable childcare can help close the labour-force participation gap between men and women over the medium to long-term.
Imports of machinery and equipment were up 25 per cent from pre-pandemic levels as of May, but businesses can do more, the report said. Non-financial corporations, for instance, have built up a cash stockpile that is worth a third of Canada’s annual GDP.
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EV SUBSIDY TO BOOST DEMAND Marc Bédard, chief executive of Lion Electric Co., is predicting that a new federal incentive will boost demand for his company’s battery-powered trucks, some of which are now essentially the same price as diesel trucks. Ottawa’s Incentives for Medium and Heavy-duty Zero Emission Vehicles (iMHZEV) program commits $550 million to subsidize the purchase or lease of medium- and heavy-duty trucks. “This is going to make a huge difference,” Bédard said. However, critics of government intervention are arguing the subsidies make companies such as Lion artificially competitive, leading to questions about whether EV companies can stand on their own. Read the full story by the Financial Post’s Marisa Coulton. Photo by Handout/Lion Electric Co.
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Marie-Claude Bibeau, federal minister of agriculture and agri-food, will be joined by David Marit, minister of agriculture for Saskatchewan, and other provincial and territorial ministers for a media conference following the annual conference of federal, provincial and territorial ministers of agriculture
Statistics Canada to release travel figures between Canada and other countries for May
Today’s data: Canadian retail sales and U.S. S&P global manufacturing PMI
Earnings: Hampton Financial Corp.
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Ford adjusts its EV strategy as supply shortages jeopardize sales targets
Lion Electric CEO predicts Ottawa’s new EV-truck subsidy will boost demand
Rogers replaces technology chief after massive outage draws fire
‘Our credibility is being tested:’ Tiff Macklem says path to soft landing is narrowing
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A missing turbine that Moscow says has caused the Nord Stream 1 pipeline to pump less gas to Europe is stuck in transit in Germany because Russia has so far not given the go-ahead to transport it back, two people familiar with the matter said to Reuters. The turbine, which usually operates at the Russian Portovaya compressor station, had been undergoing maintenance in Canada but was flown back to Cologne, Germany, on July 17 by logistics firm Challenge Group, one of the people said. It is currently unclear when the turbine can be returned, the people said, adding this could still take days or even weeks. The transport back to Germany happened after weeks of consultations between Berlin and the Canadian government over whether such a move would violate Western sanctions imposed on Russia in the wake of its invasion of Ukraine. Read on for the full story.
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While Canadian provinces start financial literacy programs in schools, trends among kids show there’s still work to be done. As the government is trying to do its part by standardizing financial education, parents also need to be their childrens’ primary teachers. Learning at home can fill the gap left between whatever information students might find online or learn at school. Read on for the full story by our content partner MoneyWise Canada.
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Today’s Posthaste was written by Noella Ovid, with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.
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