Investors are becoming increasingly convinced that Canada is headed towards recession.
A key indicator of rough times ahead, known as the yield curve, recently inverted for both the U.S. and Canada, something that usually happens shortly before the economy starts shrinking. Long story short, investors are betting Canada's interest rates are going to be coming down, which usually is a sign of hard times.
Couple that with the economy's surprisingly weak showing at the end of last year, and you have a recipe for trouble ahead. But one major part of the picture is signalling just the opposite: Canada's labour market, which is going from strength to strength these days.
Watch: Canada's most in-demand jobs in 2019. Story continues below.
Statistics Canada data released Monday showed there were 548,000 job vacancies nationwide in the fourth quarter of 2018, up 16.6 per cent in a year. All 10 of the largest industrial sectors saw an increase in job openings. Among provinces, only Saskatchewan saw a decrease in job openings, and only by about 500 jobs.
Even with anemic exports and consumer demand slowing down (retail sales have fallen for five of the past six months), Canadian employers are showing no signs of slowing down their hiring.
Long-term job vacancies are also on the rise, with the number of job openings sitting vacant for three months or more hitting record highs around 400,000 over the past year, according to data from the Canadian Federation of Independent Business.
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This shortage of workers means that Canada's employers are — finally — beginning to seriously raise the wages they're offering to new hires. The average offered hourly wage in Canada jumped 5.2 per cent over the past year, to $21.10.
Ontario saw the strongest spike in offered wages, up 7.6 per cent in a year, to $21.85, though this coincided with the large increase to the province's minimum wage at the start of 2018, StatCan noted.
The job vacancy rate "points to further employment gains ahead," wrote Krishen Rangasamy, senior economist at National Bank of Canada, in a client note.
But while the labour shortage is good news for those looking for work or a raise, at these elevated levels it's actually beginning to harm the economy.
A report from the Business Development Bank of Canada (BDC Canada) issued in January found 53 per cent of small and medium-sized businesses say the shortage will cause them to limit business investment this year.
That's a bad sign for Canada in the longer term, because business investment is pretty much the only thing that drives job growth in the private sector.
Some businesses "will not accept new clients, they will refuse contracts. They just can't do it," BDC Canada chief economist Pierre Cléroux told HuffPost Canada last month.
Skills 'mismatch'
Rangasamy believes the spike in the job vacancy rate over the past few years, as the jobless rate dropped, is a sign of "inefficiency and (a) skills mismatch" in Canada's labour market.
This argument is strengthened by the fact that, despite record low unemployment rates recently, the average length of unemployment in Canada is nearly as long as it was in the last recession.
Simply put, the 1.1 million people on Canada's unemployment rolls today largely don't have the skills employers are looking for (or are unwilling to work the jobs available for the pay being offered).
Policymakers are waking up to the problem.
The federal Liberals' latest budget, unveiled last week, included the creation of a new Canada Training Benefit to "help pay for training, provide income support during training, and, with the cooperation of the provinces and territories, offer job protection so workers can take the time they need to keep their skills relevant," according to Employment and Social Development Canada (ESDC).
That program is also meant to address the growing risk of automation, with one in 10 Canadian jobs at "high risk" of being replaced by machines, ESDC said.
While the benefit "is no panacea, it's arguably a step in the right direction to address ongoing problems of skills mismatch," Rangasamy wrote.