2024-09-07 05:31:41
I would like to understand by what economic logic the authorities can be both concerned about the recent increase in the unemployment rate, while noting a significant shortage of labor? Who are these unemployed people who are exerting upward pressure on the unemployment rate? – Michèle Ruel, Sainte-Agathe-des-Monts
Published at 1:31 a.m.
Updated at 8:00 a.m.
We can be concerned at the same time about the rising unemployment rate and the labour shortage. This is the reality of the labour market. Unemployment and labour shortages have always coexisted. The labour needs of businesses are never perfectly aligned with the skills of people looking for work. The labour force may be available in Montreal, while the jobs are elsewhere, in the regions.
Emna Braham, director of the Institut du Québec, explains it this way: “There is not just one job market, but several. People are not interchangeable.”
Although it is not new, the rapid increase in the number of unemployed while companies complain more than ever about a shortage of workers may come as a surprise.
Because a lot has happened in a short time.
Emna Braham, director of the Quebec Institute
“Between 2017 and 2023, the job market was tight in all regions of Quebec and there was a lot of talk about a labour shortage,” she recalls. The unemployment rate was very low, the result of solid economic growth, the increase in the number of retirements and the pandemic that changed lifestyles.
New arrivals, students, vacancies
Table of Contents
Table of Contents
The wind has been turning since the end of 2023, says the economist.
To combat post-pandemic inflation, the Bank of Canada raised interest rates, slowing the economy. Businesses put the brakes on hiring while immigration surged.
Canada’s population has grown rapidly, by more than a million people in 2023 alone. Some of these new arrivals have filled job vacancies, which have shrunk in number. The rest have joined the ranks of the unemployed, which has pushed up the unemployment rate.
Asylum seekers, international students, spouses and families of these new arrivals often take the first available job. There are fewer for young people looking for a first job that does not require experience or specific skills.
Moreover, the slowdown is mostly affecting the most vulnerable sectors of the economy, such as retail, accommodation and food services, where young people, those aged 15 to 24, are numerous. “We see this all the time,” says Emna Braham. “When the job market tightens, young people and recent immigrants are always the most affected.”
The current unemployment rate of 6.6% is an average that covers different realities. Among young people aged 15 to 24, the unemployment rate was 14.5% in August, compared to 5.4% among those aged 25 to 54, according to Statistics Canada‘s latest Labour Force Survey.
At the same time as the number of unemployed increased, the number of vacant positions decreased, but there were still around 140,000 in Quebec at the last count, at the end of the first quarter of 2024.
1725712205
#Demystifying #Economics #Unemployment #Rate #Multiple #Labor #Markets
How can we explain the coexistence of high unemployment rates and labor shortages in today’s economy?
Understanding the Paradox of Worker Shortages and High Unemployment
As the economy continues to evolve, many are left wondering how authorities can be concerned about rising unemployment rates while also noting significant labor shortages. This apparent paradox has become a pressing issue, with many seeking to understand the underlying economic logic.
The Coexistence of Unemployment and Labor Shortages
According to Emna Braham, director of the Institut du Québec, “There is not just one job market, but several. People are not interchangeable.” This highlights the fact that unemployment and labor shortages have always coexisted. The labor needs of businesses are never perfectly aligned with the skills of people looking for work. For instance, the labor force may be available in urban areas, while the jobs are located in the regions [[1]].
Sector-Specific Labor Shortages
Labor shortages are often reported in specific sectors, such as IT, skilled trades, and healthcare, which reflects strong expansion demand [[2]]. This is further supported by the fact that job creation in certain regions has slowed, as seen in France and Germany in Q3 2023 [[3]].
Demographic Shifts and Labor Market Changes
The rapid increase in the number of unemployed individuals, while companies face
Labor shortage myth
Understanding the Paradox of Labor Shortages and Rising Unemployment Rates
The coexistence of labor shortages and rising unemployment rates has left many puzzled. It seems counterintuitive that businesses are struggling to find qualified workers while the unemployment rate continues to climb. However, this phenomenon is not new, and there are several factors contributing to this paradox.
The Gap Between Labor Supply and Demand
The labor market is complex, with various factors influencing the supply and demand of workers. According to Emna Braham, director of the Institut du Québec, “There is not just one job market, but several. People are not interchangeable.” [[3]]This means that the skills and qualifications of the labor force may not align with the needs of businesses. For instance, there may be a surplus of workers in one region, while jobs are available in another region.
Labor Shortages and Unemployment Rates
The labor force participation rate is an essential indicator of the labor market. In the United States, the labor force participation rate has been declining, reaching 62.7% in July 2024, down from 63.3% in February 2020 and 67.2% in January 2001 [[2]]. This decline implies that there are fewer people actively seeking employment, contributing to labor shortages.
On the other hand, the unemployment rate has been rising, exerting upward pressure on the labor market. In the eurozone, an excess of 3.8 million workers equates to about two percentage points of unemployment, adding to a substantial easing of labor shortages [[1]]. This increase in unemployment rates can be attributed to various factors, including changes in the demographics of the labor force, retirements, and shifts in industries.
Industries Affected by Labor Shortages
Certain industries are more prone to labor shortages due to their specific requirements and qualifications. For example, industries with lower-than-average unemployment rates, such as healthcare and technology, often struggle to find experienced candidates to fill job openings [[3]]. These industries require specialized skills and training, making it challenging to find suitable candidates.
Explaining the Coexistence of Labor Shortages and High Unemployment Rates
Several factors contribute to the coexistence of labor shortages and high unemployment rates:
- Skills mismatch: The skills and qualifications of the labor force may not align with the needs of businesses, leading to labor shortages in certain industries.
- Regional disparities: Labor supply and demand may not be evenly distributed across regions, resulting in labor shortages in some areas and unemployment in others.
- Demographic changes: Shifts in the demographics of the labor force, such as retirements and changes in lifestyle, can contribute to labor shortages and rising unemployment rates
