The labour market recovery is not normal by any stretch: Economist
One prominent Bay Street economist is warning that Canada's uneven labour recovery post-pandemic could have long-lasting economic effects if not addressed.
“We still see this asymmetrical widening in the income gap. So, not only are we seeing the wealth gap widening, but also the income gap is widening,” Benjamin Tal, deputy chief economist at CIBC World Markets Inc., said Monday. “That worries me a lot.”
His comments come on the same day BDO Debt Solutions released new data showing the deepening financial divide among Canadians.
The latest BDO Affordability Index showed 43 per cent of respondents acquired additional debt because of the pandemic, up from four per cent from 2020. Around 28 per cent of people polled reported their financial situation improved during the pandemic as they saved money and paid down debt.
The labour market returned to pre-pandemic levels in September but Tal said Canada's jobs recovery has mostly been in public sector positions, rather than the private sector or self-employment.
“It’s very asymmetrical,” he said. “It’s not changing with the passage of time. The labour market appears to be going back to normal but it’s not normal – not by any stretch of the imagination.
“Given the fact that the Bank of Canada is talking about an inclusive recovery before they start raising interest rates – can we reach this inclusive recovery given the nature of the labour market. We’re opening up and we’re not seeing all the jobs coming back – and that’s something that worries me.”
He also noted his concern about labour market participation rates by people on both ends of the age spectrum.
Tal said the fact that young people haven’t flocked back to the labour market yet despite a flurry of job openings made him wonder whether the labour shortage might become more prolonged than many businesses expect – even after government support programs end.
As for older Canadians – Tal believes many of those that exited the labour market, are likely gone for good.
“If those people already left the labour market – you know what? They’re not coming back. Which means the shortage of labour will be with us for a while which some implications on wages as indicated by businesses today,” he said.