Labour Day 2022 is an excellent time to step back and assess developments in the job market. How have things evolved during the pandemic relative to the expectations that prevailed before the virus arrived in early 2020?
Even as global economic activity slows, in North America and B.C., labour market conditions remain unusually tight.
Employment growth in B.C. has slowed to a crawl in recent months, but at 2.74 million, the number of jobs has risen significantly (by almost 4%) since the start of 2020. The unemployment rate sits at 4.7%, a near-record low. True, an outsize share of recent net job creation in B.C. is accounted for by an expanding public sector. But we have also seen solid job gains in several private sector industries. In B.C., the number of job vacancies exceeds the number of people looking for work. Meanwhile, in Canada as a whole, the roughly 1 million job vacancies as of mid-2022 are also now more than the number of unemployed.
South of the border, the United States reports 11.2 million job openings and a national unemployment rate of 3.5% in an environment of widespread worker shortages and escalating wage pressures. So tight is the American job market that one recent news story was headlined: “For job searchers, $20 per hour is the new $15.”
To be sure, faltering economic growth, rising interest rates, and the prospect of recession should further cool hiring and trigger more layoffs in Canada and the U.S. in the coming months. But it is striking that virtually all economic forecasters, when looking through the economic cycle and beyond 2022-23, foresee labour shortages as the biggest constraint on future economic growth over the balance of the decade.
In some sense, the onset of worker scarcity is a surprise. In the 5-6 years leading up to the pandemic, there was a widespread belief that automation, artificial intelligence, the spread of robots, and other developments associated with the “fourth industrial revolution” would potentially upend labour markets and result in millions of jobs disappearing quickly across the advanced economies collectively.
Indeed, this view continues to be reflected in some media commentary and the odd report produced by prominent consulting firms.
A much-discussed academic paper published in early 2017 estimated that 45-47% of all jobs in the advanced economies were at “high risk” of disruption owing to automation and the adoption of other digital technologies. Closer to home, back in 2018, our colleague David Williams, with the same methodology as the just-cited paper, found that 42% of jobs in B.C. had a “high probability” of being disrupted or fundamentally changed in the next two decades, again due to automation. A major study from the McKinsey Global Institute, published a few years before the pandemic hit, predicted that intelligent agents, robots and other digital technologies could eliminate the need for 30% of all “human labour” and displace up to 800 million jobs worldwide by 2030.
From today’s vantage point, such projections of large-scale job losses/disruption look premature – to say the least. An examination of detailed data on employment by occupation and industry in Canada and B.C. does not point to a current or imminent tsunami of technology-driven job destruction rolling across large swathes of the economy.
Before the pandemic, we occasionally encountered stories suggesting that large numbers of truck and bus drivers would soon be out of work as self-driving vehicles replaced those reliant on human beings. Today, news reports talk of shortages of truck drivers as one of the factors hindering the recovery of supply chains impacted by COVID-19. Transportation providers such as TransLink here in B.C. struggle mightily to fill vacant positions for transit operators.
The dramatic shift to work-from-home in 2020 and 2021 underscored the crucial role of digital technologies and platforms in enabling workers and employers to adjust and innovate amid the COVID-19 shock. But so far, we see little evidence that the persistence of remote work models (or the recent growth of e-commerce) is depressing the demand for labour – including in industries where WFH has proved to be most popular.
Far from the arrival of the digital economy heralding a dystopian “end of days” scenario for hundreds of millions of soon-to-be-jobless people, today we see a world where labour is in short supply, wages and salaries are climbing (albeit often not sufficiently to match recent inflation), and bargaining power in some industries and occupations has shifted in favour of workers.
Looking further ahead, it is possible – indeed, likely – that the march of technology will lead to job losses and dislocation in some segments of the labour market. But the key question is over what period such changes will make themselves felt. We suspect that technology-enabled labour displacement will be more incremental than sudden. New products, services and innovation also mean people will be employed in completely new (currently unknown) occupations. This suggests, to us, that the economy and the job market will have time to adjust as the “fourth industrial revolution” continues to unfold.
On that comparatively happy note, we want to wish our readers a restful and contemplative Labour Day.
 Wells Fargo U.S. Economic Forecast, August 2022.
Axios Markets, August 30, 2022.
McKinsey and the World Economic Forum, “Harnessing the technologies of the Fourth Industrial Revolution,” January 28, 2021.
Carl Frey and Michael Osborne, “The Future of Employment: How Susceptible are Jobs to Computerization,” Technological Forecasting and Social Change
114 (January 2017).
David Williams, “Career advice for B.C. workers in the age of automation,” January 27, 2019 (published in the Victoria Times Colonist and also available at www.bcbc.com)