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The Globe and Mail asked dozens of experts about the economy in 2022. Here are the charts they think are important to watch and why

Illustration by DAVE MURRAY

Decoding 2022: The Globe asked dozens of experts – from economists and strategists to investors and academics – to make sense of the economy in the year ahead. These are the charts they think are important to watch and why.


Running hot, by almost every metric

In mid-October, the Bank of Canada released a paper discussing various ways to measure the health of the labour market, which had become more challenging to assess during the pandemic. Strength in one category could mask weakness in another and vice versa, providing a distorted picture of the sustainability and inclusivity of the recovery. So the bank proposed a more complex tool to measure different areas of slack: overall conditions, inclusiveness and job characteristics. We recreated this “dashboard” to provide a real-time measure of these dynamics in Canada’s jobs market that the bank is using to gauge the output gap (or the difference between what the economy is producing and what it could be producing, in its current state). Well, the most recent string of jobs reports now indicates Canada is operating at full employment. And wage gains will soon follow. This leads us to believe that the bank is ready to remove traditional policy accommodation and could hike as early as January, 2022, if the Omicron variant remains contained through vaccine efficacy.

Ian Pollick, global head of fixed income, CIBC Capital Markets


Same worker, different work

The Canadian economy has made great progress since it was partly shuttered by the pandemic in the spring of 2020. Employment has fully recovered, according to Statistics Canada’s Labour Force Survey. However, while the number of persons working is back to normal, the occupational structure of the labour force has changed considerably. Some occupations have prospered – those in business, finance and administration, and in natural and applied sciences – while others have fewer employees. The share of sales and service occupations in total employment especially remains much lower.

Occupational shares in employment

Monthly, Jan. 2018 to Nov. 2021, % of total employment,

seasonally adjusted

25%

Sales and service

20

Business/finance

15

Trades/transport

Educ./law/services

10

Nat./appl. sciences

Management

Health

5

Manufact./utilities

Arts/culture/sport

Natural res./ag.

0

2018

2019

2020

2021

the globe and mail, source: philip smith

Occupational shares in employment

Monthly, Jan. 2018 to Nov. 2021, % of total employment,

seasonally adjusted

25%

Sales and service

20

Business/finance

15

Trades/transport

Educ./law/services

10

Nat./appl. sciences

Management

Health

5

Manufact./utilities

Arts/culture/sport

Natural res./ag.

0

2018

2019

2020

2021

the globe and mail, source: philip smith

Occupational shares in employment

Monthly, Jan. 2018 to Nov. 2021, % of total employment, seasonally adjusted

25%

Sales and service

20

Business/finance

15

Trades/transport

Educ./law/services

10

Nat./appl. sciences

Management

Health

5

Manufact./utilities

Arts/culture/sport

Natural res./ag.

0

2018

2019

2020

2021

the globe and mail, source: philip smith

These shifts in the occupational structure reflect, to a considerable degree, changes in the industrial composition of GDP. While service-sector output has recovered overall, it remains depressed in the accommodation and food services industries, and in arts, entertainment and recreation. In the goods sector, output was also down in manufacturing, utilities and agriculture as of the third quarter 2021.

Ways of doing business have changed during the pandemic, with a greater emphasis on the use of more efficient production technologies. Working remotely has become more common, and modern audio-visual equipment is now in wider use. Still, over the year ahead it remains to be seen to what extent the occupational structure returns toward what it was before the pandemic began.

Philip Smith, economist (@PhilSmith26)


Child care and the Canadian advantage

The past three Canadian jobs reports suggest the pandemic boosted the labour-force participation rates of prime-age Canadian workers to a historic high. Meanwhile, the pandemic shows worrying signs of having permanently dented participation rates in the United States. Canada and the U.S. define unemployment, and hence labour-force participation, differently. Adjusting Canadian labour-force participation rates to make them comparable to U.S. rates reveals a Canadian advantage dating back to 2001 that reached an all-time high of six percentage points in September, 2021 – a gap that has significant implications for economic growth. Will this gap close in 2022 or widen further as Canada invests in ambitious subsidized child-care programs across the country, while the U.S. remains one of only six countries in the world without a national paid maternity leave policy?

Mikal Skuterud, associate professor of economics, University of Waterloo (@mikalskuterud)


The ‘missing worker’ reality

When we talk about labour shortages, we shouldn’t overlook the direct health impacts of the pandemic on labour supply. Given what we’re learning about the long-term effects of COVID-19, a disease that just keeps on giving, the projections are worrisome. First, let’s recall that some so-called missing workers are dead. Among working-age adults in Canada, 1,181 have died since the start of the pandemic. Another 6,480 have survived an ICU admission and will very likely have long-term disability related to COVID-19 and necessary medical interventions, while another 18,810 have survived a hospital admission (but not ICU) and are at heightened risk for disability, relative to the general population of COVID-19 survivors. Nearly 1.1 million working-age adults in Canada have been infected by COVID-19 and between one-quarter and one-half could have or develop post-COVID symptoms that may limit their health or activity, whether for a few months or maybe even permanently. These estimates are all up to the start of December and before the effects of Omicron.

How many working-age Canadians

may have long-COVID

Upper bound

Point estimate

Lower bound

900,000

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

Any long-

COVID

Chronic

fatigue

General pain

or discomfort

Depression

or PTSD

Shortness

of breath

the globe and mail, Source: jennifer robson,

calculations using statistics canada data

How many working-age Canadians

may have long-COVID

Upper bound

Point estimate

Lower bound

900,000

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

Any long-

COVID

Chronic

fatigue

General pain

or discomfort

Depression

or PTSD

Shortness

of breath

the globe and mail, Source: jennifer robson,

calculations using statistics canada data

How many working-age Canadians may have long-COVID

Upper bound

Point estimate

Lower bound

900,000

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

Any long-

COVID

Chronic

fatigue

General pain

or discomfort

Depression

or PTSD

Shortness

of breath

the globe and mail, Source: jennifer robson, calculations using statistics canada data

We should be thinking about our readiness to respond to more workers with disabilities. Disability too often means reduced labour-market attachment and inadequate access to supports. In a normal year, only about 3,500 working-age Canadians receive disability benefits from the Canada Pension Plan for long-term illness related to an infectious disease. According to Statistics Canada, less than half of workers reported having long-term disability coverage at work at the start of the pandemic. The federal government has passed legislation promising a new Canada Disability Benefit, but the design process and details are still being determined. Will this pandemic finally force policy makers, employers and insurance providers to respond to the challenges faced by working-age adults with disabilities?

Jennifer Robson, associate professor of political management, Carleton University (@JenniferRobson8)


Entrepreneurial erosion

Initially, the 16 per cent of Canadian workers who are self-employed seemed to avoid the worst of the crisis. But while the rest of the labour market rapidly rebounded, the situation for the self-employed has continued to deteriorate. The breakdown by gender shows that men drove the initial decline, but their number has trended slightly higher since late 2020. In contrast, female self-employment has seen no recovery and continues to fall, marking a stunning reversal after years of progress in increasing the number of women entrepreneurs. In 2022, we’ll be keeping a close eye on these small businesses to see if their fortunes reverse. Entrepreneurship drives innovation and productivity growth. Their absence could entail serious long-term harm.

Brendan LaCerda, associate director and senior economist, Moody’s Analytics


A nation of moonlighters

The pandemic created a remarkable drop in employment rates followed by a rapid and strong recovery with employment rates for the group of core-aged men and women now higher than prior to the pandemic. This graph shows the evolution of the number of multiple job holders relative to its level in November, 2000, by class of workers for core-aged (25- to 54-year-old) workers. The number of multiple job holders steadily increased since 2000 among public sector (dotted line) and private sector (black line) full-time employees. While the pandemic temporarily hindered the possibility of holding multiple jobs, the desire or necessity to take on the additional workload from a second job seems to be stronger than ever. Could this moonlighting phenomenon among the core-aged group of public and private sector employees be made easier by the increased availability of remote work induced by the pandemic?

Stéphanie Lluis, professor of economics, University of Waterloo (@StephanieLluis)


Divergent recoveries

In 2020, there was no shortage of concern over what kind of job-market recovery we would be dealing with but by 2021 we had a good sense of the verdict. And it’s a very different one in the United States and in Canada.

Canada was able to experience what resembles a V-shape recovery in its labour participation rate, whereas the U.S. participation-rate recovery has been closer to L-shaped. In particular, there was little evidence in Canada of the wave of retirements seen in the U.S. It also helps explain why there are still more people unemployed (i.e. people active in the labour market but not working) than there are job vacancies in Canada, contrary to the U.S., where there are more jobs available for every person sidelined that’s searching for a job.

Better job supply in Canada partly explains why wage growth has not surged nearly as much as in the U.S., where the increase has been especially significant in lower-paid occupations. Even though the context of significant labour shortages means that wage growth pressure will remain higher in both countries, for now it looks like the risk of an inflationary spiral related to wage pressures might be less acute in Canada than in the U.S. Markets have been expecting the Bank of Canada to hike rates more aggressively than the Fed all year long, but labour supply trends are not really supportive of such a scenario.

Jimmy Jean, chief economist, Desjardins Group


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