Canadian economy extends hiring streak in December, but Omicron threat looms

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The Canadian economy continued to churn out jobs in December, but that was likely the end of a seven-month hiring streak now that the Omicron variant is walloping the labour market.

The country added a net 54,700 positions last month, after a gain of 153,700 jobs in November, Statistics Canada said Friday. The unemployment rate fell to 5.9 per cent from 6 per cent. Over the year, the tally of working Canadians jumped about 885,000 – a record annual gain that highlighted the economy’s rebound from the depths of the pandemic-induced recession.

Job vacancies soar beyond one million in tightening labour market

This year, however, is off to a wobbly start. Omicron has led to soaring rates of infection and work absences. Parents are again coping with virtual schooling in many areas. And the Ontario and Quebec governments have shuttered several close-contact industries.

Moreover, Statscan’s job report reflects work conditions between Dec. 5 and 11, offering a dated snapshot of the economy. The next employment figures should be much weaker.

“Even with the solid gain in December, look for a meaningful pullback in January,” Doug Porter, chief economist at Bank of Montreal, said in a client note. “In both the second and third wave restrictions, the Canadian job market shed more than 200,000 positions over a two-month span, and there is little reason to expect this wave to be significantly different.”

Prior to the Omicron wave, the labour market was firmly in a boom period. All of December’s job gains were in full-time positions, which rose by 122,500. Ontario paced the provinces with the creation of 46,900 positions last month. Construction was a standout industry, seeing a gain of 27,100 jobs – its first increase since August.

In broad terms, labour market indicators stack up nicely with those of February, 2020. As of December, about 240,000 more people were working than back then, and the unemployment rate was a mere 0.2 percentage points higher. And the labour participation rate for Canadians 25 to 54 – essentially, those in their prime earning years – rallied to a record high.

The recent run of labour strength had prompted predictions on Bay Street that the Bank of Canada would accelerate its timeline for hiking interest rates, perhaps starting in January or March.

Now, Omicron has complicated matters.

It’s challenging to get an early read on layoffs. The federal government has not released any preliminary data on uptake of its Canada Worker Lockdown Benefit, which provides income support to people who cannot work owing to a pandemic lockdown. The benefit offers $300 weekly before tax; in previous waves, $500 payments were available.

During the week starting Dec. 20, the number of Canadians receiving jobless benefits through Employment Insurance had jumped about 33,000 from two weeks earlier, according to preliminary data.

Ottawa expands eligibility for Canada Worker Lockdown Benefit and wage and rent supports to regions with capacity limits

For much of 2021, Canadian employers were struggling to find workers. As of October, companies were recruiting for almost one million job vacancies, near a record high. The numbers of openings in health care, hospitality, manufacturing and retail were particularly high.

Given the tight labour market, “companies may be reluctant to let staff go due to the difficulties they faced recruiting in the reopening phase,” said Andrew Grantham, senior economist at CIBC Capital Markets, in a report. While he’s expecting a “notable decline” in employment to start the year, it may also be less severe than in prior waves.

A key metric to watch will be hours worked. In many cases, people have remained with their employers but have seen their hours cut drastically – sometimes to zero. Air Canada, for example, said its staffing levels haven’t changed, even though the airline started the year by cancelling hundreds of flights.

Another indicator to watch is temporary layoffs. Faced with a persistent labour shortage, many companies are keen to maintain a connection with their workers. Cineplex Inc. said it temporarily laid off almost 6,000 employees in Ontario and Quebec after those provinces recently shut down cinemas, along with gyms, indoor dining and other service industries.

“We are eager to get our team back to work once and for all, as soon as these temporary restrictions are lifted,” said Cineplex spokewoman Melissa Pressacco via e-mail.

While the labour market has entered a rough period, Mr. Porter pointed to the rapid rehiring that took place after the second and third waves of the pandemic as a good omen.

“We would expect a repeat performance this time as well – and the robust performance late last year is testament to the underlying solid demand for workers,” he said.

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