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When it comes to the labour market, this is may not be your parents’ – or your grandparents’ – recession.

The global economy may be headed for a downturn of sorts in 2023, but weirdly enough it looks like it will happen without a spike in the unemployment rate.

Thanks to aging work forces, workers may be in short supply even as the overall economy weakens. That sounds like good news, but there is a flip side as well.

Everyone might get to keep working, but their recession-punishment this time around could be that their standard of living keeps trickling away and it might take some time before they make up the losses.

In past recessions, a slowing in the overall economy has meant an increase in the unemployment rate albeit with a lag of some months.

During the 2008 recession, the Canadian unemployment rate went from 6 per cent in late 2007 to 8.8 per cent in the summer of 2009.

That increase is mild compared to the situation in 1991, when the rate went from less than 8 per cent in the spring of 1990 to close to 12 per cent a little more than two years later. The spike was even more pronounced in the early 1980s when it went from around 7 per cent to more than 13 per cent.

Demographics is to a large extent behind the different changes in the unemployment rate. During the 1970s, as baby boomers surged into the work force, labour force growth (the increase in the number of people available for work, whether employed or searching for a job) was running at more than 3 per cent annually.

This slipped significantly over the next two decades as the boomers aged and recessions stopped people from looking for work and by 2007, before the last recession hit, was at 1.7 per cent.

The pandemic has skewed things a bit, but as of 2002 with baby boomers retiring in droves and millennials and Gen Zs only partly making up the difference, growth in the labour force was 1.5 per cent and headed lower.

If there are enough layoffs the unemployment rate will certainly rise from its current 5 per cent, but given that so many people are retiring and that there are relatively few new workers coming in, it is difficult to see it approaching the levels of past recessions.

The International Labour Organization recently commented on this in terms of the global economy, saying that they expect unemployment to stay more or less stable through next year even though they expect very weak economic growth.

Overall they anticipate an unemployment rate of 5.8 per cent globally in 2023, unchanged from 2022. Like Canada, much of the world is aging and the prevailing problem in many industries remains how to get enough workers to get the work done.

If all of this makes it sound like Canadian workers may get through this recession unscathed, that isn’t quite true.

It is clear that layoffs are happening, particularly in the tech sector but in others as well as organizations try to cope with the high interest rates that have (as planned by central banks) slowed demand.

Anecdotally at least it seems that those workers are finding work, but perhaps at lower wages. There also seems to be a change in the composition of employment.

In the early days of the pandemic, scores of workers in the industries such as food service and accommodation were laid off, while higher paid workers in fields such as tech and finance were hired in droves. Now we are seeing something of a rebalancing, with the demand strong for the first group and demand waning for the second.

And that is the crux of it: this recession may not be easily summarized by a simple figure like the unemployment rate that goes up or down, but rather by the slow-drip of lost earnings power.

In Canada, wage growth was 4.5 per cent in January while the inflation rate was 5.9 per cent, meaning that households could buy less in real terms than they could a year earlier. This too is a global phenomenon, with the ILO calculating, that the ‘real’ (inflation-adjusted) earnings of workers in advanced countries fell by 2.2 per cent in 2022.

After recessions, there tends to be a period of hiring when employment goes up and the unemployment rate goes down, sometimes by a lot. When it comes to making up for lost wages this should happen too, but it isn’t clear how long it will take for workers to get back to their previous situation and make real gains.

The demographics are certainly on their side, but there are other factors to consider as well including how much automation is adopted over the next few years and whether that displaces workers.

What is certain though is that when it comes to assessing the damage of this downturn in the business cycle (whether or not we call it a recession) we need to read the tea leaves differently than we have in the past.

The labour market is more nuanced than ever and that means we should not be looking to a single economic statistic to assess how well or badly workers are faring.

Economist Linda Nazareth is the Host of the podcast Work and the Future and the author of Working it Out: Getting Ready for the Redefined Future of Work. Visit her at