Canada is hiring. Employment rose 153,700 last month, Statistics Canada reported Friday in Ottawa. That’s more than quadruple the 37,500 gain economists were predicting, according to the median estimate in a Bloomberg survey.

The latest jobs report brings the unemployment rate to 6% — very near pre-pandemic levels — and down from 6.7% in October. Employment is now 186,000 jobs beyond where it was in February 2020. Hours worked rose 0.7%, fully recouping Covid losses for the first time.

Employment increased in both the services-producing and goods-producing sectors in November. Both full-time (+80,000; +0.5%) and part-time (+74,000; +2.1%) work increased, and employment gains were spread across six provinces.

More than 8 in 10 (80.7%) of women aged 25 to 54 were employed in November, the highest employment rate recorded since comparable data became available in 1976 and 1.0 percentage points higher than in February 2020. Employment also increased among women aged 55 and older, up by 19,000 (+1.1%) from October. Despite this increase, their employment continued to lag its February 2020 level by 42,000 (-2.2%).

Employment rate for very recent immigrants remains elevated

The employment rate among very recent immigrants (in Canada for five years or less) was little changed in November at 71.3%, but was 6.5 percentage points higher than in November 2019. Among immigrants who have been in Canada for more than five years, the employment rate was unchanged from November 2019 at 60.3%. For people born in Canada, the employment rate was down 1.6 percentage points from November 2019 to 60.9% (three-month moving averages, not seasonally adjusted).

Wages Begin to Rise

Wages are also up. Average hourly wages were 5.2% higher (+$1.46 to $29.57) in November 2021 compared with two years earlier. Without controlling for changes in the composition of employment (ie, the unique way the pandemic has shifted employment), actual average hourly wages of all employees increased 7.7% (+$2.18 to $30.40) over the same two-year period (not seasonally adjusted). This is roughly in line with increases to the consumer price index (CPI), which is up 5.3% since two years ago.

The record-high job vacancies in September have continued to focus attention on the question of whether employers in some industries might raise wages to address recruitment and retention challenges. Across all industries, from November 2019 to November 2021, average wages increased at a faster rate for new employees (defined as those with job tenure of three months or less) (+10.0%; +$2.09) than for employees who have been in their current job for a longer period (defined as those with job tenure of more than 18 months) (+6.4%; +$1.95) (three-month moving averages, not seasonally adjusted).

In the accommodation and food services industry, average wages for new employees increased 8.5% from two years earlier, while wages for established employees were up 2.3%. However, this trend was not as evident for some occupations in this industry. Among food and beverage servers, average hourly wages for new employees ($16.92) were little changed in November compared with two years earlier, possibly an indication that employers in this industry face challenges adjusting wages in the context of current business conditions (three-month moving average, not seasonally adjusted).

Pressure Mounts on Employers Looking to Hire

More than half of small businesses (55%) cannot get all the staff they need for current operations or to meet new demand, while another 16 per cent were able to face the challenge, but at a significant additional cost, according to a new report by the Canadian Federation of Independent Business (CFIB) entitled Labour shortages are back with a vengeance. Despite a majority of affected businesses raising wages, the issue persists, leading many to try a number of alternatives, with temporary foreign workers (TFWs) and automation being among the most successful.

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"Small businesses were already experiencing a very significant shortage of labour at the beginning of 2020, and the pandemic has made the situation only more complex," said CFIB vice-president of national research Simon Gaudreault. "Industries that were locked down for long periods of time, like hospitality, have seen a mass exodus as workers upskilled or switched to other jobs, and virtually all sectors are facing major demographic upheavals with not enough new workers coming in to replace those who are retiring."

Lack of candidates, qualification mismatch and labour market disruptions drive labour shortages

Nearly two thirds (63%) of businesses affected by labour shortages said they can't find job applicants with the right skillset or experience, while 52 per cent reported a lack of any candidates at all. One reason for this is that the distribution of job seekers to jobs in different education categories is imbalanced: in Q1 2021, 22 per cent of the unemployed had a level of education equal to or higher than a bachelor's degree, while only 15 per cent of the market requires this level of education.

The pandemic has also disrupted established relationships between employers and employees and pushed people out of certain sectors. Nearly a quarter (24 per cent) of small businesses report that employees switched industries due to the pandemic, and this was even higher among businesses in social services (37 per cent) and hospitality (48 per cent).

Wage increases have not been the expected silver bullet: Business owners explore other options

On average, small businesses with labour shortages expect to increase wages by 3.7 per cent over the next 12 months, above the national average of 3.1 per cent. More than four fifths (82 per cent) of businesses affected by staffing shortages have already raised wages, but the success rate is a mere 31 per cent, according to CFIB's analysis. In fact, 60 per cent of those who raised wages but did not find it helpful in attracting workers said that they received no qualified applicants or no applicants at all.

"Business owners are in a tough position and have to balance the expectations of job seekers with their own ability to remain competitive," added Laure-Anna Bomal, Research Analyst at CFIB and author of the report. "We're seeing a lot of creative and flexible solutions emerge as a result, but more needs to be done to support them as they face this incredible long-term challenge."

Some of the other solutions small business owners have turned to include automation and temporary foreign workers (TFWs). A third (33 per cent) of businesses facing labour shortages have invested in automation, with a success rate of 81 per cent. TFWs have a lower utilization rate (16 per cent) because the criteria, complexity and cost of the program limit which businesses can apply, but a success rate of 52 per cent among those who used it. The low utilization to high success rate ratio suggests that TFWs could be a promising solution for Canada's labour shortages, especially if the program were expanded to other sectors.

CFIB is urging governments to address labour shortages and help business owners meet their staffing needs by:

• Improving and streamlining the temporary foreign worker and immigration processes to bring more workers into Canada faster, ensuring a good fit between immigrants and positions to fill, and providing them with a path to permanent residency.
• Opening up the TFW program temporarily to allow small businesses requiring a broader range of skills and wage levels to access TFWs as they try to recover from the pandemic.
• Stimulating automation through programs or tax credits.
• Providing tax relief for workers over 65 who wish to remain employed by making their hours worked tax-free.
• Implementing training programs for specific groups such as young people who were not in education, employment or training (NEETs), racialized minorities or people with disabilities.
• Ensuring that Employment Insurance (EI) programs do not discourage individuals from returning to work.
• Reducing EI premiums for small businesses to offset the costs of hiring and training staff.
• Encouraging Work Integrated Learning (WIL) programs in universities and colleges (such as co–op programs and internships) by including and catering to small business needs.
• Adding tax credits for worker training, particularly for informal, on-the-job training and tax credits for hiring young graduates and students.

"Small businesses have a long and steep climb to recovery, and having the right workers in place or other tools to address labour shortages is a big part of that," concluded Corinne Pohlmann, Senior Vice-President of National Affairs at CFIB. "They are already doing all they can to attract workers, but they need governments to do their part by adopting policies that increase productivity, connect job seekers with employers and don't put the cost of hiring out of reach."

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