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Canadian workers are changing jobs less frequently, another indicator that the labour market is softening as businesses feel the pressure of higher interest rates.

In July, the seasonally adjusted job-changing rate was 0.4 per cent, according to data from Statistics Canada’s labour force survey. It’s the lowest number recorded since September, 2020, and currently lies below the pre-pandemic average from 2016 to 2019 of 0.7 per cent.

“That’s a weak number,” Brendon Bernard, senior economist with the Indeed Hiring Lab, told The Globe and Mail.

The job-changing rate reflects the proportion of workers who remained employed from one month to the next but who changed jobs in-between. It’s a barometer for the health of the labour market. A higher rate suggests that workers are confident in their ability to find new work, and switching jobs typically means employees are able to negotiate higher wages.

The job-switching rate had been declining since it peaked in early 2022 after the easing of restrictions, when some people may have realized they wished to pursue different career goals while living through a deadly pandemic. This downward trend, paired with an uptick in the unemployment rate and declining job vacancies, adds to mounting evidence that the labour market is weakening, despite still being red hot compared to pre-pandemic times.

“The Bank of Canada has hiked interest rates pretty aggressively, and the outlook for the economy is a bit weaker now,” Mr. Bernard said. “Employers have pulled back on recruiting activity. And so that means that conditions aren’t as favourable for job seekers as they were a year ago.”

The latest labour market data show that the demand for labour is easing. As of August 10, Canadian job postings on Indeed were down 23 per cent from a year earlier, while still up 25 per cent compared to pre-pandemic levels, as per the company’s second-quarter survey that gathered 10,000 responses.

The unemployment rate edged higher for the third consecutive month to 5.5 per cent in July, according to Statscan data.

Still, “you would expect to see more people changing jobs right now,” Stephen Tapp, chief economist at the Canadian Chamber of Commerce, told The Globe.

Historically, the number of people switching jobs tends to decrease ahead of recessions, reflecting workers’ fears around unfavourable labour conditions. For this reason, the job-changing rate provides insight into labour market psychology heading into challenging economic times, Thomas Lemieux, professor at the Vancouver School of Economics at the University of British Columbia, said in an interview.

The same Indeed survey also showed that employed job seekers are less confident that they can find work quickly.

Meanwhile, businesses report that finding workers has become easier, mainly due to less competition for labour and more people looking for jobs, according to the Bank of Canada’s Business Outlook Survey for the second quarter of 2023, referenced in the central bank’s July monetary policy report. The BoC also said that net job creation is “below the pace implied by population growth in recent months.”

Looking at the metrics that the BoC uses to evaluate the strength of the labour market, most remained above or in line with a range of benchmarks, except for the job finding rate, which stood at 21.9 per cent in July, closer to its historical lowest of 19.5 per cent. This rate indicates that people are currently less likely to move from unemployment to employment.

“Going forward, we should expect this job switching rate to continue to slow as the labour market slows down as well,” Mr. Tapp added.

But the picture that the job-switching numbers paint about the labour market is more nuanced than it seems. Canada never went through the Great Resignation seen in the U.S., when workers south of the border churned jobs en masse after the reopening of the economy. But job-changing still ticked higher in early 2022, meaning more Canadians were seeking better opportunities, although to a lesser extent, as restrictions eased.

The rate also does not capture structural changes in the labour market, including laid-off individuals who switched industries or found new jobs within the same industry but took more than a few weeks off.

Economists say it’s also possible that the decline in job-changing is part of the comedown from the pandemic hiring rush, given it may be too early for recent hires to be looking for new opportunities right now.

“One thing that happened in the Canadian labour market as it came out of the pandemic was that a lot of people found better jobs than they were working earlier,” Mr. Bernard said.

In fact, Canadian wages have been growing. In July, average hourly wages reaccelerated to an annual rate of 5 per cent, from 4.2 per cent in June.

In a recent survey, the BoC also pointed out there is still appetite for voluntary job change.

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