BUSINESS
10/23/2019 16:36 EDT

Canadian Job Growth To Slow As Businesses Turn To Automation: Forecast

Faced with higher wages and a labour shortage, businesses are automating instead.

fizkes via Getty Images

MONTREAL ― Canada’s job market has been on a tear for the past few years, but the hiring spree could soon be over ― and part of it seems to be because businesses are turning to robots and software amid a serious labour shortage.

The Bank of Canada’s Business Outlook Survey measures hiring intentions among Canadian businesses, and the latest edition, released Tuesday, has found a significant slowdown in hiring plans since last year.

Typically, when hiring intentions slow, so does job growth, as this chart from National Bank Financial (NBF) shows.

National Bank Financial
This chart from National Bank Financial shows employment growth tracking hiring intentions over the past 10 years. Hiring intentions have now turned down, presaging a downturn in job growth.

Part of it is simply that Canada’s job growth is unsustainably strong, with the country adding jobs faster than it’s adding people ― about two per cent job growth, versus 1.5 per cent population growth annually at present.

“You would expect a sharp moderation in employment after such a blockbuster year,” NBF senior economist Krishen Rangasamy said.

But there’s another reason for the slowdown, one that the Bank of Canada noted in its outlook: Businesses are increasingly looking to automation as they deal with rising wages and a shortage of labour that means some 425,000 private-sector jobs in Canada are going unfilled for months.

Watch: These jobs got the biggest raises ― and the deepest pay cuts ― last year. Story continues below.

 

The move to automation can be seen in the Bank of Canada’s survey: Even as hiring intentions slow, spending on new machinery has spiked to its highest levels in a year.

“A lot of businesses are saying they are seeing higher labour costs, so they have to try to increase efficiency through automation,” Rangasamy said. “That’s why we’re not as optimistic about hiring as we were a few quarters ago.”

Canada’s struggling energy industry will not be of much help on the jobs front, either.

“Unless you see a significant rebound over the next few months, you would expect them to be cautious” in their hiring plans for 2020, Rangasamy said.

All the same, he doesn’t see Canada’s job market tipping into prolonged job declines; NBF’s forecast sees no recession for the country on the horizon. 

But as job growth slows, Canadians can expect those volatile monthly job reports from Statistics Canada to deliver bad news more frequently, Rangasamy predicted.