After several years of torrid job growth and a steadily falling unemployment rate, B.C.’s labour market looks to have cooled off.
In particular, job creation has come to a shuddering halt so far in 2018. In Statistics Canada’s June Labour Force Survey, for example, employment was down 0.3% from the month before. In fact, monthly job gains have been so lacklustre that the overall level of employment in the province is slightly below where it stood a year ago. Even Metro Vancouver – once Canada’s hottest job market – has experienced a dip in year-over-year employment. Moreover, the provincial unemployment rate has ticked higher, compared with both one month and one year ago.
Yet, oddly, there are also signs that the demand for workers remains robust.
For one thing, B.C. continues to report the country’s highest job vacancy rate. And casual observation confirms that many businesses – including retailers, restaurants, trucking companies and most technology firms, among others – are struggling to fill open positions. Some public-sector organizations, including municipal police departments, TransLink and school districts, are also hiring.
Second, we are seeing upward pressure on wages and salaries in many areas of the economy. Stronger wage growth became apparent in the second half of 2017. After rising at a 1% to 1.5% clip for a couple of years, growth in the all-industry average hourly wage moved up to the 3% range last fall.
By early 2018, average wages were increasing by more than 4%, with the figure climbing to around 6% recently. Hourly pay increases of 4% to 6% are unusual.
Over the last two decades, wage growth across the B.C. economy has averaged 2.2% annually, slightly higher than average inflation as measured by the all-items consumer price index. The current pace of wage increases is therefore almost three times the long-term average. That is not what one would expect if the job market was turning down.
How do we make sense of a pattern of flat job growth alongside other evidence pointing to a tight labour market? Part of the explanation lies on the supply side: there simply aren’t enough available workers to fill the vacant positions. The research team at the Business Council of BC believes that the province’s economy has been growing above potential for some time, which has largely drained the pool of excess labour. Dwindling net interprovincial in-migration has aggravated the shortfall of job-seeking workers.
While the limited supply of available workers is clearly curtailing job growth, a downshift in the demand for labour in some sectors of the B.C. economy is also part of the story. The unfolding slump in the housing sector has implications for the labour market. One aspect of this is the modest decline in home building that is now occurring.
But the bigger impact is being felt via the sharp downturn in real estate transactions. Fewer existing-home sales mean less need for the services of real estate agents, property appraisers, home inspectors, real estate lawyers and mortgage finance experts. Indeed, Statistics Canada’s figures show a sizable drop in the number of people working in B.C.’s large finance and real estate sector.
Lower levels of real estate activity also have a knock-on effect on some segments of retail (e.g., businesses purveying home furnishings, carpeting and flooring). The pace of retail spending growth has visibly slowed in recent months, while the number of people working in retail has declined since the beginning of the year. As the province’s formerly booming housing market loses steam, there might also be a forthcoming drop in renovation spending as well as further weakness in some parts of the retail space.
The bottom line is that job creation in B.C. has flatlined. Employment is one of the most important economic indicators, and a fall-off in job growth as dramatic as what we have seen since mid-2017 would normally stoke recessionary fears. But with much of the levelling-off stemming from a constrained labour supply rather than sagging demand for workers, concerns about an economic downturn are premature.
The change in the residential housing market and some softening in other parts of the economy do complicate the picture. However, as long as wage growth remains elevated and the unemployment rate low, the limited availability of workers is likely to remain the predominant factor behind muted job gains. •
Jock Finlayson is the Business Council of British Columbia’s executive vice-president and chief policy officer; Ken Peacock is the council’s chief economist.
As published by Business in Vancouver.