Canada shows record employment, but employers face a crisis because of new lockdowns and low morale

Last month, Canada’s job market exceeded forecasts showing a strong end to a record year for employment growth.

According to Statistics Canada, employment was up by 54,700 in December, which is more than double the 25,000 increase economists were expecting in a Bloomberg poll. Moreover, full-time jobs sector reported a 123,000 gain, as many part-time workers switched to permanent employment, marking one more sign of a strong performance.

The report is one more proof that economic conditions were extremely strong in the last weeks of the previous year – right before Canada faced a new wave of COVID-19 cases and the recent lockdowns. The national economy created 886,000 new jobs in 2021, which is a record year. Following the loss of 3 million jobs at the beginning of the pandemic, employment now exceeds the results of February 2020 by 240,500 positions.

The unemployment rate went down from 6% in November to 5.9% in December, almost reaching the historic lows.

“It’s definitely a very healthy number for December. Yes, it’s not quite the pace we’ve seen during the previous several months, but that’s not surprising with the economy coming close to its full employment,” – Josh Nye, senior economist at RBC Capital Markets, noted.

Such results will certainly intensify forecasts of interest rate hikes in the nearest future. Now, markets expect five rate increases by the central bank in 2022, starting from this month already, when the Bank of Canada’s first rate meeting of the year takes place on January 26.

“Strong performance will probably make the BoC open the door for a March increase,” – Benjamin Reitzes from Bank of Montreal, says.

Of course, the omicron variant will restrain the expansion at the beginning of this year. Canada has already faced a significant rise in COVID-19 cases recently, and the government decided to shut down high-contact segments.

The influence of those restrictions will not be reflected in the data until January results appear in February. However, during the previous 2 years, the national economy has shown incredible resilience amid numerous waves of lockdowns and that will hardly change.

At the same time, businesses are dealing with staffing challenges following one more lockdown aimed at restraining the spread of the Omicron COVID-19 variant.

Low employee morale, labour shortages – employers are forced to review their plans to get ready for a “new normal” again almost two years after the pandemic began.

“Employers are facing a real crisis in terms of retaining talent and having talent prepared to perform their work,” – noted Laura Williams, managing partner of Toronto-based Williams HR Law LLP.

Although Canadian businesses may feel frustrated as they have to cope with another lockdown, many have already made contingency plans to see whether they can keep operating with staff working remotely or on-site, Williams said.

Nevertheless, those plans may be at risk, in case employees show COVID-19 symptoms and need a PCR-test, she noted. The deal is that Ontario recently restricted PCR testing for Canadians considered high-risk or workers in high-risk conditions.

“There will be more employees calling in sick in case they need to work on-site, as they can’t get a PCR-test and have COVID-19 symptoms,” – Williams explained.

Amid the current lockdown (and possible further restrictions if new variants cause more COVID-19 waves), Williams suggests that employers review how they can provide their services in a new remote-working reality.