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Canada’s employment rate will continue to cool and wage growth will slow in 2024, but the job market will hold up better than in previous downturns, according to a report published by TD Economics on Monday.

The country’s job market has held up well during the Bank of Canada’s interest rate hikes last year, growing by 2.4%, or adding about 500,000 net new jobs. The unemployment rate in the last quarter of 2023 was 5.8%, similar to the same quarter in 2019.

“While private-sector job creation has ratcheted down significantly in recent months, mass job losses have failed to materialize as some forecasters had been anticipating,” the report said.

Instead of weakening labour demand being the primary cause for higher unemployment rates as seen in the past, an abundant labour supply will be the dominant driver of higher unemployment in this cycle, TD said. While employment rates in every province outpaced labour force growth in 2023, every province will see higher labour force growth rates relative to employment rates this year.

The report predicts that Quebec, Ontario and B.C. will suffer from the highest unemployment rate rises ranging from 1% to 1.6%. But in Alberta and the Maritimes, it will only go up by half a per cent or less as employment growth can better keep pace with labour force growth in those regions.

When it comes to specific sectors, TD expects the public service (especially health care), construction and oil and gas industries will see more vacancies relative to 2015 to 2019 levels, which will benefit fossil fuel-rich Alberta and the public service-heavy Maritime provinces. On the flip side, the vacancy rates for manufacturing and service industries like finance, insurance and real estate have fallen back to pre-pandemic levels.

The labour participation rate has flattened out with help from historic immigration levels over the past two years pulling a large number of working-age people into Canada. However, aging baby boomers, a large base of discouraged job seekers and the longer time taken to attain education will put downward pressure back on the labour force participation rate in the near term, TD said.

Canadian wage growth has come down from the pandemic peak of 8% to 5.5% year-on-year in December, but it’s still twice as high as the pre-pandemic average.

“Looking ahead, we anticipate national wage growth to cool as employment slows, unemployment tracks higher, and job vacancies decline,” the report said.

Just like the unemployment rate, downward wage pressure will vary from province to province. The report anticipates wages in B.C., Ontario, Nova Scotia and P.E.I. to moderate more quickly over the coming quarters while Saskatchewan, Manitoba, Quebec and Alberta will still have elevated wages with their tighter job markets and, except Alberta, higher unionization rates.

“Canada‚Äôs labour market is relatively well positioned to handle the coming macroeconomic slowdown,” the report said. “Unlike in past downturns, and barring any major unforeseen events, continued but slowing hiring absent substantial economy-wide layoffs should remain a focal point.”