Experts predict 'widespread' unemployment in 2023

A poll of leading Canadian financial and economic experts say the labour market will contract during the expected recession

Experts predict 'widespread' unemployment in 2023
Steve Randall

There could be a significant slowdown in the Canadian labour market in the coming months with a jump in unemployment.

With recession looking increasingly likely despite some recent positive GDP data, most members of a panel of Canadian experts believe that rising unemployment is ahead.

Recent recessions have seen unemployment rise by 1.6% on average and the latest jobs report showed that the unemployment rate remained above the record lows of 4.9% seen in the summer (at 5.2%).

Almost three quarters of the expert panel convened by expect unemployment to rise in 2023.

"Tighter monetary policy will slow growth,” explains Angelo Melino, an economics professor at the University of Toronto “I expect job openings to contract sharply, with modest but broad-based declines in employment in 2023.” 

Oxford Economics is predicting a 1% decline in employment during the recession, which the firm believes will start before 2022 ends.

"In a post-pandemic environment of elevated job vacancies and widespread labour shortages, we think firms will decide to hold onto hard-to-find workers, limiting the decline in employment relative to past downturns,” said Oxford Economics director Tony Stillo. “In our forecast, the unemployment rate is set to rise 3.1% over a longer period of seven quarters, peaking at 8.2% by Q1 2024."

Hiring freezes

Taylor Schleich, rates strategist with National Bank of Canada, also expects job losses but not a widespread hike in unemployment.

“Hiring freezes may be more likely,” he said. “Given labour scarcity over past years, there may be reluctance to shed jobs outright.”