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CIBC Economics

With the unemployment rates in Canada moving down and with population growth slowing quite significantly, there are people who are concerned that labour shortages will arise within the Canadian economy and result in some inflationary pressures.
While we think that some companies and sectors may experience this, we do not think that this will become an economy wide problem, particularly not this year.
Job vacancy rates in the economy are still quite low, signaling demand for labour is quite low, and the reduction that we&#8217;ve seen in the unemployment rate recently really reflects better job matching between those seeking jobs and the jobs that are available,  and particularly when it comes to newcomers into the country.
Even if job vacancies and demand does improve, there is the scope for participation in the labour market to increase, which will increase the size of the labour force.
So, when it comes to the coming year, we don&#8217;t think that the economy will run out of labour and cause inflationary pressures.
We don&#8217;t see the Bank of Canada needing to hike interest rates until well into 2027, and continue to forecast that interest rates will remain on hold throughout this year.

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What do current trends in the Canadian labour market tell us about what’s in store for the economy this year?

What do current trends in the Canadian labour market tell us about what’s in store for the economy this year?

CIBC Economics

Andrew Grantham

Senior Economist

CIBC