Posthaste: Why Canada's job market is not as 'healthy' as it seems

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The Bank of Canada should be careful about placing too much emphasis on the unemployment rate, say CIBC economists

But a closer look at the details reveals that not all is as it seems in Canada’s job market. Though employment is up more than 3 per cent since the beginning of the pandemic, working hours are up only 1.75 per cent, said CIBC economists Andrew Grantham and Karen Charbonneau in a recent report.Article contentshould be careful about placing too much emphasis on the unemployment rate as a signpost of excess demand within the economy,” they said.

Employee sick days increased in 2022 because COVID-19 continues to circulate and other illnesses have re-emerged. The economists calculate that more than 0.4 more hours per employee were lost in the fourth quarter of 2022 compared to the average between 2017 and 2019.Article content“If vacation time was not still running below pre-pandemic norms, lost hours due to sickness and family needs alone would be equivalent to requiring around 230,000 additional employees,” said the economists.

The shortfall in hours worked also helps explain the country’s high vacancy rates. The economists say their estimate of the hours lost because of illness or family matters would have raised job vacancies by 60,000 — about a quarter of the excess vacancies currently seen in the economy compared to pre-pandemic.

The additional paid sick leave also raises wage costs. CIBC estimates that these costs have increased by between 0.5 per cent and 0.9 per cent just from time paid to employees who are absent because of sickness or family matters.Article content

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