Record low unemployment rates will cause Canada’s planned limits on temporary residents to add to the struggles of the hospitality and retail sectors, according to Desjardins economist Randall Bartlett.
“Some have argued that higher wages will persuade people to return to the labour force, but there is little evidence of people waiting on the sidelines to work,” wrote Bartlett in a report titled “With Non-Permanent Residents Expected to Decline, Who Will Fill Their Jobs?”
“For sectors of the economy that emerged from the pandemic battered and bruised, the federal government’s plan to reduce NPR [non-permanent resident] admissions will make an already challenging situation even more difficult.”
In May, Canada’s unemployment rate went up to 6.2 per cent despite adding 27,000 jobs.
The economy added 62,000 part-time jobs during this timeframe, while full-time employment declined by 36,000, according to Statistics Canada.
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The small number of available workers is the source of a future problem for employers in food, accommodation and other sectors that typically employ NPRs but will have to deal with cutbacks in their numbers.
These include retail trade; transportation and warehousing; health care and social assistance; and educational services.
“Unfortunately, these are also among the sectors most likely to be struggling coming out of the pandemic and to have experienced a surge in insolvencies at the start of 2024,” Bartlett said.
On March 21, 2024, Ottawa announced its plan to target a “decrease in our temporary resident’s population to 5 per cent over the next three years.”
As per the Desjardins report, this would weigh on the overall employment rate in Canada. This is because young NPRs have a higher propensity to work than their peers, which will push up the unemployment rate as the level of unemployment would be little changed but the size of the labour force would be smaller.
Job vacancy may increase as the share of young workers in the population falls in conjunction with the reduction in NPR numbers. This, according to Bartlett, should increase wage growth, although not enough to “meaningfully impact inflation.”
This is because weaker overall demand from fewer NPRs should weigh on underlying inflation.
NPR-heavy sectors need to adjust the most, with Bartlett writing that “It’s no surprise then that accommodation and food services and retail trade are likely to be the sectors most negatively impacted by a reduction in the number of NPRs admitted to Canada.”
“Importantly, these are also the sectors we identified as being most vulnerable to adverse business conditions in the run-up to the January 2024 Canada Emergency Business Account (CEBA) loan repayment deadline.”
There is not a huge reserve of Canadians waiting to take up the jobs that NPRs will leave bare. While some companies will be able to innovate and increase productivity in the face of this labour force adversity, others will fail in doing so. This, according to Desjardins, will continue to pose challenges for Canadian businesses.
