In a recent article about the Canadian Labour Market in 2021 on the Indeed Hiring Lab, Senior Economist Brendon Bernard writes that employment for Canadians has rebounded faster from the pandemic than their American neighbours.
Even though both countries had large initial declines in employment, conditions at the end of 2021 were closer to pre-pandemic levels in Canada than in the United States.
Let’s look more in-depth into the similarities and differences of the labour market on both sides of the border since the start of the pandemic, and what we can expect in the future.
Canada’s higher-paying industries lead to its faster recovery
Since the start of the pandemic through November 2021, jobs in high-paying industries such as technical services, finances and construction have done relatively well in Canada (up 3.3% from their pre-pandemic level), while public administration, mining, and logging have been lagging in the US (contributing to a 1.7% decrease, prior to recent revisions).
Likewise, mid-paying sectors such as educational services, health care, and social assistance are better off in Canada (0,3% growth compared to -1,9% in the US). On the other hand, the US has the upper hand in industries such as leisure and hospitality, including accommodation, food services, arts, entertainment, and recreation. This discrepancy could be coming from the earlier relaxation of public health restrictions in parts of the US.
There isn’t any definitive explanation as to why mid- and high-paying sectors pulled through better in Canada. Hypotheses might include that the Canada Emergency Wage Subsidy helped its population and that migration trends could be boosting some industries in Canada. However, it is worth noting that even though some sectors are faring better in Canada, real GDP growth is stronger in the US. Although the pandemic has been substantially more severe south of the border, most of their directly impacted sectors fared better.
People of different age groups and education levels had varying employment rates throughout the pandemic
The faster Canadian labour market recovery is visible among many demographic groups. Parents of ages 25-54 with and without children under 13 are better off in Canada, while mothers of younger children are having a hard time in the US. Indeed, as of last November, the employment rate of this group was declining more than any other in the US. Differences in access to childcare during the pandemic could be a contributing factor to the gap.
In Canada, people of varying education levels have shifted toward higher-paying job types (in November 2021, 21% of 25-54-year-old workers with a high school diploma or less were employed in higher-paying occupations compared to 18.7% in 2019). Similar yet less substantial shifts have also occurred in university and other post-secondary graduates. These changes appear to have helped the pace at which the Canadian labour market recovered. Consequently, it seems that some employers are now hiring candidates that they would have otherwise overlooked, which can lead to more opportunities for growth but could also raise new potential challenges if new hires require greater on-the-job training.
The different impacts on job postings, wage increases, job-hopping and self-employment
Last December, Indeed job postings on both sides of the border were up about about 60% from pre-pandemic levels. Despite this similarity in both countries, wage has grown significantly more in the US, especially in the sectors of leisure and hospitality. A correlated shift that is more significant in the US is the increase in the phenomenon of job-hopping. This is happening in most industries, but quit rates are particularly high in several lower-wage sectors.
Higher rates of job-hopping and increasing wages in the US seem to be intertwined. The higher quit rates could put more pressure on employers to raise wages in order to retain existing staff while increasing wages might cause workers to switch occupations to secure better salaries. Another factor that comes into play is the greater occurrence of employers offering perks such as signing bonuses in the United States than in Canada.
Lastly, self-employment has declined in Canada and this likely reflects the workers’ desire to secure more abundant traditional employment opportunities. In contrast, self-employment levels are above pre-pandemic levels in the US.
Trends for the year ahead
Overall, some dimensions of the Canadian labour market are faring better than in the US, while other pandemic-era shifts have been greater south of the border. It is important to keep in mind that new waves of COVID-19 can reverse, at least temporarily, some of the progress achieved as we saw in the Canadian January employment numbers.
Looking ahead, key themes to watch revolve around how employers and workers respond to an increased job seekers’ market. Will Canada follow the United States’ lead on trends like wage growth and job-hopping? These developments will be key, especially as inflation remains an ongoing strain on households’ budgets.