{"id":695355,"date":"2026-05-26T18:04:11","date_gmt":"2026-05-26T18:04:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/695355\/"},"modified":"2026-05-26T18:04:11","modified_gmt":"2026-05-26T18:04:11","slug":"bank-of-canada-warns-of-low-hire-low-fire-job-market-that-complicates-rate-decisions","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/695355\/","title":{"rendered":"Bank of Canada warns of \u2018low-hire, low-fire\u2019 job market that complicates rate decisions"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

The ability to find a job ‘is close to its lowest point in 30 years,’ Bank of Canada external deputy governor Nicolas Vincent said Tuesday.Sammy Kogan\/The Globe and Mail<\/p>\n

The Bank of Canada is warning that the country\u2019s labour market is undergoing a structural change, creating a \u201clow-hire, low-fire\u201d environment that makes it more difficult to conduct monetary policy.<\/p>\n

Prolonged, lacklustre conditions in the job market may lead to lasting damage to workers\u2019 prospects, according to the central bank, and complicate its decision-making on interest rates.<\/p>\n

In a Tuesday speech to policymakers and researchers at a Montreal think-tank, external deputy governor Nicolas Vincent said that it was critical for the central bank to distinguish between short-term, cyclical changes in the labour market and long-term, structural ones in order to adapt its monetary policy decision-making. <\/p>\n

Under normal circumstances, elevated unemployment would imply slack in the economy, which the bank could respond to by lowering interest rates to stimulate demand. <\/p>\n

However, if unemployment is being caused by structural changes rather than cyclical ones, lower interest rates may not be the right choice. <\/p>\n

\u201cWhile monetary policy can, to some extent, help the economy transition during periods of restructuring, it cannot compensate for lower supply caused by factors such as trade friction or population aging,\u201d Mr. Vincent said. \u201cMoreover, if we were to stimulate demand when the issue is more structural, we could create inflationary pressures while also delaying necessary restructuring in the economy.\u201d<\/p>\n

He noted that since 2022, the Canadian job market has been less dynamic than it used to be, with unemployed workers finding it much harder to get a job. <\/p>\n

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Canada\u2019s unemployment rate has gradually risen from 5 per cent at the end of 2022 to a peak of 7.1 per cent last fall. But the layoff rate in Canada has been low and relatively stable, according to the bank\u2019s analysis of Statistics Canada data, implying that employers are simply not hiring at the pace that they used to.<\/p>\n

Today, the ability to find a job \u201cis close to its lowest point in 30 years,\u201d Mr. Vincent said. \u201cEssentially, we\u2019re in a low-hire, low-fire labour market. And people are changing jobs less often. It all creates a sense of inertia.\u201d<\/p>\n

He said he believes that the decline in dynamism in the Canadian job market is due to macro political and economic factors \u2013 namely higher interest rates since late 2022, and fluctuations in U.S. trade policy \u2013 that compelled employers to scale back hiring. <\/p>\n

The country\u2019s aging population may also be a factor, Mr. Vincent said. In the bank\u2019s own surveys, businesses have emphasized that it is very hard to replace experienced workers, and employers appear to be hanging on to seasoned and more qualified employees for as long as possible, in anticipation of a coming wave of retirements. <\/p>\n

Statscan data analyzed by the bank shows that since December, 2022, those aged between 55 and 64 have seen a rise in their employment rate by almost one percentage point. However, the employment rate among young people aged 15 to 24 has dropped by 5.5 percentage points since late 2022. <\/p>\n

It is not just harder to find a job in the current economy, it is also taking much longer, Mr. Vincent said, noting that the share of unemployed people looking for work for more than six months has never been higher since the early 2000s. <\/p>\n

The bank attributes the rise in long-term unemployment to the skills gap: Workers\u2019 experience and the skills that employers are looking for are not matching up, and unemployed workers say their main obstacle is not having the right combination of skills and experience. <\/p>\n

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Long-term unemployment can become a major concern if it leads to longer-lasting effects, such as people becoming discouraged and leaving the labour force entirely, reducing the pool of qualified workers and limiting economic growth potential, Mr. Vincent said. <\/p>\n

The bank is also deeply concerned about the high youth unemployment rate, which has risen above 14 per cent from about 9 per cent in late 2022. A quarter of long-term unemployed people in Canada are those aged between 15 and 24, according to the bank\u2019s analysis of Statscan data. <\/p>\n

Mr. Vincent said he believes that high immigration rates between 2022 and 2024 \u2013 the result of a series of policy decisions to increase the number of international students and temporary foreign workers \u2013 intensified competition for lower-skill and entry-level jobs, and made it harder for young people to find work. <\/p>\n

He also mentioned artificial intelligence as a \u201cplausible structural explanation\u201d for why young people are struggling to find jobs, noting the central bank\u2019s own research suggests that job-finding rates have fallen the most in occupations most exposed to AI. <\/p>\n

Mr. Vincent said the bank is using more granular data and developing new economic models to try to understand whether the changes in the job market are cyclical or structural. <\/p>\n

Unlike the U.S. Federal Reserve, the Bank of Canada does not have a mandate to target maximum employment. The bank\u2019s sole mandate is to target 2-per-cent inflation. <\/p>\n

The bank has kept its policy rate at 2.25 per cent for four consecutive rate decisions. It is treading a narrow path, with upside risks to inflation from the global oil price shock and downside risks to inflation from trade uncertainty. <\/p>\n

At the last rate decision in April, Governor Tiff Macklem said the bank could hike interest rates \u201cconsecutive\u201d times if oil prices remain elevated and bleed into broader inflationary pressures. But it could also cut interest rates if negotiations around the North American trade agreement go sideways and Canada gets hit with higher U.S. tariffs. <\/p>\n

The next interest rate announcement is on June 10. <\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: The ability to find a job ‘is close to its lowest point in…\n","protected":false},"author":2,"featured_media":695356,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,46,1398],"class_list":["post-695355","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-ca","tag-canada","tag-economy","tag-nodelphi"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/695355","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=695355"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/695355\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/695356"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=695355"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=695355"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=695355"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}