Notwithstanding the effects of the current trade war and the
creeping up of the unemployment rate, labour shortages have been a persistent
economic theme since the pandemic in Canada as well as northern Ontario. A recent
Conference Board report has argued that the main challenge for the labour
market in Northern Ontario is a
shortage of labour with the region experiencing some of the highest job
vacancy rates in the country. This situation has been brought about by an increase
in the demand for skilled trades and labour because of resource and construction projects in the region combined with an aging population and continued out-migration.
Measuring the labour shortage and its impact in the north is
an interesting exercise given that traditionally the region has seen itself as
chronically depressed and lacking opportunity.
Statistics Canada has labour market data which provides statistics by
economic region including data for job vacancies and Figure 1 plots quarterly
job vacancies for both Northeastern and Northwestern Ontario. While vacancies are down since the peak of
the pandemic, it remains that there has been an upward trend overall since 2015
and as of the fourth quarter of 2024, there were approximately 9,000 job
vacancies in the Northeast and just under 5,000 in the Northwest.
Of course, having a lot of vacancies is in some respects
good news because it is correlated with low unemployment rates and unemployment
rates in northern Ontario have declined since 2015 as vacancy rates have
grown. Figure 2 plots unemployment rates
for both northern regions and the downward trend is noticeable. The inverse relationship between job openings
or vacancies and the unemployment rate is known as a Beveridge curve – as job
openings increase, the unemployment rate drops.
Figures 3 and 4 plot these relationships for both the Northeast and the
Northwest along with a linear trend. Based
on these linear trends, the current number of job openings in the Northeast and
Northwest are associated with unemployment rates of about 6 and 4 percent
respectively and in fact the monthly unemployment rate in the fourth quarter of
2024 averaged 5.8 percent in the Northeast and 4.7 percent in the Northwest.
However, these job vacancies do come at an economic cost –
in particular regional output foregone. A
quick back of the envelope calculation can be done using an estimate of output
or GDP per worker. This can be calculated for Greater Sudbury and Thunder Bay using GDP
data from Statistics
Canada extrapolated to 2024 with growth rates from the most recent Major
City Insights done by the Conference Board of Canada. When combined with the regional
employment data from Statistics Canada, one can get an estimate of GDP per
employee. In this case, for 2024, GDP
per employee in both cities was approximately $130,000. Using this number and assuming each job
vacancy results in foregone output of $130,000 is a heroic assumption as it assumes every job in the region produces $130,000 worth of GDP. Nonetheless, in the absence of anything else, here goes.
In 2024, the average quarterly number of job vacancies comes
out to 8,713 for Northeastern Ontario and 5,148 for the Northwest. Multiplying the number of vacancies by the
GDP produced per employee results in a foregone GDP output of approximately $1.1
billion in Northeastern Ontario and about 0.7 billion in the Northwest for a
total of $1.8 billion dollars. That is a
large number, but it needs to be considered relative to the output of the region. Again, a current GDP estimate for Northern
Ontario is not readily available but using employment numbers for the region
and the per employee GDP estimate already available I get an estimate of about
$50 billion for current nominal GDP. In
other words, the output foregone represents nearly 4 percent of the current GDP
in Ontario’s north.
This is of course only a crude estimate but think of
this. Simply being able to fill the job
vacancies currently available represents about 4 percent of northern Ontario’s GDP. Even if this number is an overestimate, it is something to think about given the
amount of energy that is usually expended thinking about how to boost growth in
the region. Simply filling the jobs that currently need people would in of itself boost economic output and activity.
