By the most popular barometer of the Canadian and U.S. job markets, both countries have enjoyed the best of times of late. Canada’s unemployment rate fell below 5% over the summer, the lowest rate since Statistics Canada began tracking the metric using current methodology, while south of the border the rate fell to 3.6% for only the second time since 1969. The only other time was right before the pandemic hit.
But there’s one large and widening difference between the two: Millions of prime-working-age Americans — those aged 25 to 54 — are missing from the labour force, even as that same cohort in Canada continues to grow. Over the past decade, Canada’s prime-age labour force has grown nearly 13%, whereas the U.S. labour force is up just 2.1%, having yet to even fully recover from the shocks of the Great Recession and COVID-19 recession.
Labour force participation is critical to growth. In the absence of higher productivity, a stalled or shrinking labour force is like attaching a speed limiter to your economy.
The gap is, in part, due to Canada’s more rapid overall population growth. For instance, in the second quarter of 2022, Canada’s population grew 1.3% versus 0.3% in the U.S., where net international immigration has been falling since 2016 and hit its lowest level in decades in 2021. As Americans age out of their prime working years, the U.S. lacks newcomers to replace them.
But America’s shrinking prime-age labour force is being driven by even more intractable problems. The labour force participation rate among men in that age group has been on the decline for decades—from 97% in 1960 to 88% now—particularly among those with low education levels as technology and offshoring reduce options for low-skilled workers. While women between the ages of 25 and 54 entering the labour force offset the decline among men, the Great Recession reversed that trend, too, with women’s participation only recently returning to the same level it was in 2008.
As the COVID recovery continues, there have been hopeful signs in recent months that prime-age workers are finally re-entering the labour force. America badly needs that trend to hold.
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