Canada’s unemployment rate fell in February – down to 7.4%, from 7.6% in January. This would normally be a good reason to cheer. But not this time… Canada’s economy actually lost 2,800 jobs. The reason why unemployment did not increase was simply because the labour force shrank even faster the number of jobs. And the reason why the labour force shrank is because people gave up looking for work (which puts them out of Statistics Canada’s unemployment calculation).
Who were those people who gave up looking for work? It turns out, they were mostly young people: School and university graduates who are looking to start their careers. In many cases, they are looking for their first job. Among them, unemployment has been increasing for a while now and reached 14.7% last month – its highest level since October 2010. So it is no wonder that 200,000 of them threw in the towel and gave up looking for work altogether.
This is an issue also because if young people remain outside of the labour force too long, this will likely make their skills and qualifications more difficult to market.
In a way, the departure of young workers from the labour force is just one of the symptoms of a two large fundamental problem facing our job market:
The time has come when baby boomers were supposed to start retiring. But they aren’t, and often this is not because they don’t want to. Many baby boomers simply cannot afford to retire – either because they did not save enough money for retirement, or because even if they did, they lost much of it during the 2008 financial markets meltdown. Economists generally agree that increasing the retirement age is not necessarily a bad thing: It is supposed to increase the size of the labour force, and with it, provide the foundations for accelerating economic growth. But the economy is not growing fast enough for a variety of domestic and international reasons. And with growth prospects capped, Canada’s economy simply does not have the capacity to absorb the growing number of people looking for work. The result is either higher unemployment, or departure of certain people from the job market.
The second major problem seems to be a mismatch between the skills that employers want and those that unemployed people have. If you are, for example, a registered nurse, you will find it quite easy to get a job. At the same time, many laid of manufacturing workers are finding that their experience and credentials are not really in high demand. So employers often scramble to find candidates for their job vacancies, while at the same time, the ranks of the unemployed is swelling.
There are no signs that any of these two problems will be resolved quickly in the next few years. Finding work will remain difficult for many unemployed. Unemployment will remain high, and wage growth will remain anemic. And ironically, the higher unemployment and meager wage growth will further suppress the growth prospects of the economy.