“The tightness in the labour market is a symptom of the general imbalance between demand and supply that is fuelling inflation and hurting all Canadians,” he said.You can read Macklem's full remarks below.
The Government and the Bank also agree that monetary policy should continue to support maximum sustainable employment. We recognize that maximum sustainable employment is not directly measurable and is determined largely by non-monetary factors that can change through time. This reflects the reality that maximum sustainable employment is more of a concept than a number.
We’re trying to balance the risks of over- and under-tightening monetary policy. If we don’t raise interest rates enough, Canadians will continue to endure high inflation, and high inflation will become entrenched, requiring much higher interest rates and a sharper slowing in the economy to restore price stability. If we raise interest rates too much, the economy will slow more than it needs to, unemployment will rise considerably, and inflation will undershoot our target.
Just four months after the employment lows of April, nearly two-thirds of the job losses were recouped . What was behind the rapid bounce back? It was largely because the recession came from an unprecedented event—the pandemic—and not from imbalances or structural problems in the economy. That meant that when the economy reopened, employment could be restored quickly. We expected a rapid rebound in employment with reopening, but we were concerned that too many people would be left behind.
That brings me to 2022 and our current labour market. We are in excess demand, where the economy’s need for labour is outpacing its ability to supply it. At the end of last year, it was not obvious that the labour market would rapidly overheat in 2022. The Omicron variant was spreading, and COVID-19 case numbers were once again rising.
Increasingly, we hear concerns that Europe, the United States and even Canada are heading for a recession. In our Business Outlook Survey released a few weeks ago, a majority of Canadian firms surveyed said a recession is likely in the next 12 months. As we said in our October Monetary Policy Report, we expect growth to stall in the next few quarters—in other words, growth will be close to zero.
So what does that mean for Canadian workers? Well, it’s clear that the adjustment is not painless. Lower vacancies mean it could take longer to find a job, and some businesses will find that with less demand for their products, they don’t have enough work for all their workers. But relieving the pressure in the labour market will contribute to restoring price stability.
Fortunately, immigration is bouncing back as border restrictions return to normal. Canada met its immigration target of 401,000 in 2021. And, based on the increase in the immigration targets since then, the shortfall in permanent residents caused by the pandemic should be recouped in 2023.9 Many advanced economies whose populations are aging are looking to increased immigration to meet the needs of their labour markets.
By adjusting to and taking advantage of structural changes in the labour market, Canada can increase the sustainable growth rate of our economy. An aging population reduces the participation rate, and higher immigration is becoming increasingly important for Canada’s potential growth. Changes brought by globalization and technological change, especially digitalization, will also continue to affect labour demand and the skills employers need.
He is bad at his job.
How can one argue FOR people becoming unemployed to reduce inflation? There is no cure for utter stupidity. Rather shift focus to produce more oil and inflation, the feeder of it, energy prices, will start to come down without having to raise interest rate.
Find another fucking way to curb inflation without hoping people lose their jobs.. Jobs feed people, your economic theories don't inflation economy canpoli
I have to theow this out there - just wondering if it’s time to look at some consolidations to releive the labour squeeze. Increasing critical mass in some businesses would lower cost of goods, and facilitate wage increases w/o raising prices. Just $0.02 from an average Joe!
AnnieClaireBO Correct
We've had historical unemployment numbers for years now, what is 1 driver in all of this and was controllable on the BoC side was raising rates YEARS ago and not worrying about the people who couldn't afford their houses back then, now they've made a lot more people worse off.
Then why doesn't Tiff do us a favour and quit his job?
🤔
That's a tough statement attaching inflation to the workers of Canada coat tails. Do you agree JustinTrudeau ,?
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