Here’s why you still can’t get a job — or a raise — despite record-low unemployment

Can't find a job in this supposedly "hot" labour market? You're not alone. Getty Images

Canada’s unemployment rate is at 5.9 per cent, close to a 40-year low. Employers lament that they can’t find people to fill job openings. This is arguably the best job market Canada has had since the onset of the financial crisis a decade ago.

And yet, at least two key measures suggest that many Canadians — whether they’re looking for a job or already have one — are still struggling.

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It still takes four and a half months, on average, to find a job

The first gauge is the time it takes the average jobseeker to find employment. Right now, unemployment spells tend to last 19 weeks, or around four and a half months, according to Statistics Canada.

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That’s “scant improvement” compared to the typical, five-and-a-half-month job hunt Canadians used to suffer during the Great Recession, Indeed Canada economist Brendon Bernard noted in a recent blog post.

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The average duration of unemployment remains well above levels seen during other periods in which unemployment was bouncing around the six-per-cent mark.

For example, in 2008, before the financial crisis started translating into layoffs, finding a new job typically took only 15 weeks, or three and a half months.

So why are job searches still taking so long?

Part of it has to do with the fact that many workers in Alberta, Saskatchewan and Newfoundland are still coping with the aftermath of the 2014-2016 energy crisis. Unemployed workers in these provinces are still taking around five and a half months to find employment, which is driving up the national average, according to Bernard.

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“This really highlights that these labour markets haven’t fully recovered,” he told Global News via phone.

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But while jobseekers are having an easier time in other provinces, the average duration of joblessness remains unusually high, given how low the current unemployment rate is.

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“It’s not entirely clear why,” Bernard said.

One possible explanation is that employers are still hesitant to hire workers who’ve been out of job for longer stretches of time. A company’s first response when business picks up is to hang on tight to the workers they already have, Bernard said. After a while, companies typically try to add fresh bodies but will try to poach workers who are already employed or hire those who’ve recently left a job. It is only over time, if labour shortages persist, that more employers start turning to people who’ve been unemployed for longer.

The good news is that if the economy keeps rolling as it has for the past year or so, we might start to finally see shorter and shorter unemployment spells, Bernard said.

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Wages aren’t growing much

The other barometer that seems stuck is wage growth.

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In a tight job market, employers are usually forced to write bigger paycheques, both to attract qualified applicants and to retain their own workers. Until recently, however, wages have been growing by a miserly 2.3 per cent per year, according to the Bank of Canada’s so-called “wage common” measure, widely regarded as the best available gauge of wage trends in the country.

It’s a trend Canada shares with the United States and several other advanced economies, Bernard said, and economists are still scratching their heads as to what may be behind it.

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One common explanation is that productivity has plateaued over the past several years, Bernard said.

Textbook economics says productivity determines wages. The faster and better you get things done at work, the more you get paid. When you look at the economy as a whole, that has a lot to do with things like the technology available to workers. It’s the difference between, for example, sifting through paper files versus scrolling through a digital database.

That’s why productivity in the U.S. and many other developed countries soared from the mid-1990s until the first years of the 2000s, when computers became ubiquitous in the office. That productivity boost resulted in big pay hikes.

Since the mid-2000s, however, productivity has “shifted down a bit,” Bernard said.

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Artificial intelligence, which is helping companies do anything from anticipate customers’ needs to build self-driving cars, could be the next big productivity booster. Employers are already paying big bucks for coders with the skills to fill AI-related jobs. But the technology has yet to trickle down across the entire economy, Bernard said.

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There are also a number of other theories about what may be holding down wages. To name a few, economists have blamed the decline of unions, corporations handing a larger share of profits to shareholders rather employees and the fact that there may be more unemployed workers than the number reflected in official statistics.

In Canada, slower growth in the oil-rich provinces also seems to be weighing on overall wage growth, Bernard said. The wage-lifting impact of the resource boom reached far beyond the oil patch, he added. Not only did it create a number of well-paying jobs in the West and Newfoundland, but the resource boom also attracted workers from the rest of Canada, creating local labour shortages that helped boost paycheques in places as far from the oil patch as Halifax. Now, however, that’s over.

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Still, wage growth may soon pick up again if economic growth stays on track.

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The Bank of Canada’s wage common numbers only reflect where wages were at the start of the summer, and the central bank itself has said that, based on its more recent surveys of businesses, wage growth might accelerate soon.

“Firms are indicating that labour shortages are getting serious,” Bernard said. That suggests “we could see a radical pickup.”

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