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Ontario Lost 80,000 Jobs in August. Should You Worry?

Probably not (yet)… but it depends on what you do for living and where you live.

Something unusual happened with Ontario’s labour market in August. According to Statistics Canada, 80,000 jobs disappearedand unemployment rose sharply, from 5.3% to 5.7%. The last time Ontario lost so many jobs in a single month was in January 2009, in the midst of the Great Recession. Granted, virtually all of the lost jobs were part-time. But following several months of steady employment growth, the scale of the job losses is so surprising, some economists publicly questioned the credibility of Statistics Canada’s report.

 

What happened? Are Statistics Canada’s numbers wrong? Or is this the beginning of a new trend?

 

No evidence of a trend change (yet) ….

It is unlikely that Statistics Canada got its numbers wrong. But there is still little evidence that the trend has changed. As employment in Ontario was declining, hiring demand (the number of new job postings published by employers) remained exceptionally strong (see chart below). This matters: In the last 2 years, employment and hiring demand have gone consistently hand-in-hand (barring seasonal hiring demand variations in December).

Both employment and hiring demand were stronger last month than this time last year. The drop in August came after 2 months (June and July) when employment growth had accelerated but demand growth hadn’t. August’s drop – while significant – only wiped out the gains from June and July. The number of jobs in Ontario was still higher in August than it was in May.

 

So, at this point, the drop looks more like a correction than a new trend: Employment growth may have only gotten ahead of itself in June and July, then returned to its longer-term growth trend from the past 2 years. (This may still change in the coming months. For example, if the US president follows through with his threat to introduce auto tariffs, this could kill 160,000 Canadian jobs.)

 

… but Ontario’s job market is changing

 

There is more happening in Ontario’s labour market than the top line employment numbers suggest. We see evidence that the employment market is undergoing a recalibration, with hiring demand growing in some areas and declining in others. So while job prospects are healthier than ever for some, others (in different occupations or locations) are actually seeing less opportunities than they did a year ago.

 

Hiring demand growth has not been distributed evenly across Ontario in the past year. It was stronger in some urban communities – including Toronto, Ottawa, and Kitchener-Waterloo – while some smaller communities (for example, Barrie and Orillia) saw declines.

 

Growth varied significantly between occupations as well. In the chart below, we compared hiring demand in occupations with more than 100 job postings over the past 3 months (June to August) with the same period last year.

 

Most of the top 25 occupations that experienced the strongest hiring demand growth were in Information Technologies (the green bars) and Healthcare (the dark blue bars). (Note: Administrative Officers are mostly project management jobs, many of which are technology-related.)

At the same time, the 25 occupations that suffered the worst decline in hiring demand in Ontario were dominated by restaurant jobs (the orange bars in the chart below), and certain skilled trades and engineering jobs that are typically in manufacturing and construction (the red bars).

What could be behind the decline in hiring demand for those occupations?

There are probably multiple factors. Manufacturers’ enthusiasm for hiring may be dampened by the ongoing uncertainty around the future of NAFTA and the newly introduced US import tariffs. Construction jobs (dominated by skilled trades) may have been affected by a recent slowdown in the real estate market in Southern Ontario.

Yet, if employers in manufacturing and construction required less people, they would probably be laying off. So we should see a corresponding increase in the number of people looking for work in the affected occupations (labour supply). We track labour supply through the Vicinity Jobs labour supply tracking service. So far, the number of job seekers in the skilled trades and engineering occupations where we recorded a drop in hiring demand has actually grown more slowly than in other occupations (though this may still change in the coming months if people were laid off in August).

There is another possible explanation: Maybe employers who were advertising certain skilled trades and engineering vacancies a year ago were unable fill them. Some may have stopped trying. This could produce a drop in hiring demand for those occupations like the one we saw.

The decline in demand for restaurant-specific occupations is likely linked to a minimum wage increase in Ontario in January (from $11.4 to $14 per hour). In British Columbia, where the minimum wage increase was less steep (from $11.35 to $12.65), demand for restaurant jobs actually grew more than in other occupations. But the minimum wage in Ontario went up in January, so it cannot explain the employment numbers drop in August. Indeed, although hiring demand for restaurant occupations remains below the levels from this time last year, the drop occurred in late 2017 and early 2018 and has it been growing since.

August’s employment decline may remain a one-off. But it is quite clear that people’s perception of the direction of Ontario’s job market – and, indeed, their employment prospects – will likely vary significantly depending on their skills, occupations, and even locations.