Opinion: The great resignation has arrived in Canada

It took a while for a version of the Great Resignation to take hold in Canada, but now it’s here. It has taken the form of a wave of retirements – and its arrival further darkens the outlook for an already troubled economy.

Statistics Canada’s July jobs report revealed that a record 300,000 Canadians have retired in the past 12 months. This is an increase of almost 30% compared to the same period last year and almost 15% compared to the months leading up to the pandemic in early 2020.

And it’s not a month-long anomaly. It continues a surge in the number of retirements that began in the spring, reversing what had been a relatively slow trend so far in the recovery from the COVID-19 recession.

The timing is not ideal, as high inflation and rapidly rising interest rates have already increased the risk of a recession next year. Capital Economics Economist Stephen Brown suggested that this retirement frenzy could be the thing to push the economy over the edge.

“The sharp increase in the number of retirees this year poses downside risks to our employment forecast, and with GDP growth already faltering, further increases the likelihood that economic activity will contract,” Brown wrote. in a research note this week.

The “Big Quit” is a term coined to describe the unusually high number of workers who left their jobs during the recovery from the COVID-19 recession, as the massive disruptions to employment and the very nature of work brought many people to rethink their relationship. with the workplace. This has been a key factor in the complicated recovery of the US labor market, where job vacancies have soared, but the labor force participation rate remains stuck below pre-pandemic levels.

Canada has largely avoided this phenomenon, at least as far as the labor market as a whole is concerned. The total number of workers who voluntarily quit their jobs has been well below pre-pandemic levels for the past two years and has declined over the past three months. Statscan noted specifically in the July jobs report that the job change rate (people changing jobs) remained at pre-pandemic levels and that the number of middle-aged workers (in the age group) remained at pre-pandemic levels. age of 25 to 54, considered the best years for participation rates) who voluntarily quit is lower than it was before the recession.

But among the population over 55, the story is suddenly very different. It is as if older workers, who had weathered the worst of the recession and the frantic and uncertain recovery, had decided enough was enough.

The exodus is most pronounced among people between 55 and the traditional retirement age of 65 – in other words, early retirement. Almost 150,000 people in this age group have opted for the proverbial gold watch in the past 12 months, almost 50% more than last summer, when early retirements hit their lowest level since 2013.

The rising wave of retirements helps explain why Canada’s labor force participation rate – the share of the adult population that is employed or looking for work – has fallen over the past two months. This decrease in the size of the available labor pool allowed the unemployment rate to fall to 4.9% – the lowest in nearly 50 years of records using comparable statistical methods – despite the combined loss of 74,000 jobs in June and July.

However, the decline in the number of participants is generally not considered an economic advantage. And even if Canada’s overall labor force participation rate remains healthy by historical standards – particularly for the core age group, where the rate is above pre-pandemic levels – the wave of retirements poses a potentially serious impediment to the economy. This implies a slowdown in the growth of an already insufficient supply of labor to meet the needs of employers, which slows the expansion of production and income that fuels consumption.

With the economy already feeling the brunt of inflation and interest rates, a slowdown in labor market growth could be too much of a burden in the months ahead.

“All of this increases the downside risk to GDP, particularly if retirements increase further,” said Mr Brown of Capital Economics.

Now, we may only be seeing some catch-up of late retirements that were put on hold during the pandemic. On the other hand, the surge in early retirement could mean a bigger change in the work landscape, a shift in mindset for workers nearing retirement that could linger for some time.

But overall, rising pension rates will be a headwind for the labor market and the economy, long after the fallout from the pandemic has worn off. Canada’s aging population means that the share of the population aged 55 and over will continue to grow significantly for many years to come. The economy’s slowing growth potential may have been temporarily clouded by the pandemic-induced labor disruption, but the implications for our demographics are unavoidable.

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