B.C. Business Matters:
Jock Finlayson >>
Preliminary Comments on the New BC Labour Market Outlook
The BC government recently published new projections for labour demand and supply encompassing the next ten years. Overall, the new labour market outlook is an improvement over earlier efforts. It is based on more rigorous modelling and reflects extensive engagement with employers and other stakeholders who were consulted in the course of developing the detailed projections.
Even so, a review of the revised forecast underscores the difficult assignment given to the analysts who were charged with completing the work. While it is relatively straightforward to come up with credible estimates for labour demand and supply at a macro-level, it is far harder to do so for individual industries, occupations and sub-provincial regions. Business cycles, foreign economic growth rates, commodity markets, the exchange rate, the development and deployment of new technologies, and the competitive dynamics unfolding in various industries all help to shape the demand for labour – and for particular kinds of skills. These factors complicate the task of forecasting the demand for workers, especially at the industry and occupation level.
For example, consider what has happened to commodity markets. The world-wide upswing in the prices for oil, minerals, metals, and other industrial raw materials that began in 2003 came to a crashing halt after 2012, and has lately turned into a full-scale rout. The result has been depressed production, investment and hiring activity in the mining and energy sectors – both in Canada and many other commodity-producing jurisdictions – over the past two years. The global commodity slump was not foreseen when the BC government prepared its previous labour market outlook for the decade ending in 2022.
With the recent downturn in commodity prices in mind, the new forecast adopts a more cautious perspective on job vacancies in the energy, mining and heavy industrial sectors of the provincial economy. But commodity markets might rebound more quickly than economists now expect. If so, BC’s primary resource and resource-based manufacturing industries would need more new workers than the revised labour market outlook assumes. This is not a criticism of the government’s report. The point is simply to acknowledge the inherent limitations of all attempts to quantify future job vacancies by industry and by occupation.
Forecasting labour supply can also be challenging because of shifts in retirement patterns, in interprovincial migration, and in the number of international immigrants who come to the province. Over the past few years, BC has seen average retirement ages creep higher, a decline followed by a more recent upsurge in net interprovincial migration, and a dramatic overhaul of the federal government’s temporary foreign worker (TFW) program that has led to a sharp fall-off in new TFWs entering the province. In addition, our neighbour to the east, Alberta, has descended into a recession triggered by the collapse of energy prices, which may be setting the stage for a multi-year exodus of skilled workers from that province to other parts of Canada. For many employers in British Columbia, Alberta no longer appears to be such a formidable competitor for talent. Again, these developments were not incorporated into the labour market forecasts developed by the BC government back in 2012.
The authors of the province’s labour market outlook understand the complexities of predicting future job openings and the various factors that impinge on labour supply. The table below provides a high-level summary of their revised ten-year BC labour demand/supply outlook.
|2014-2024 Labour Market Outlook
|Total job openings||935,000|
|Openings due to economic growth||295,000|
|Total supply additions||940,000|
|New labour force entrants||421,000|
|*interprovincial and international combined|
On the demand side, most new job openings are due to “replacement” positions that will be filled as current workers retire, quit their jobs for other reasons, or die. Approximately one-third of job openings in the next decade are based on economic growth. It should be noted that the government’s new labour demand forecast does not account for the potential development of a Liquefied Natural Gas (LNG) industry in British Columbia. Because the prospects for LNG remain uncertain, the projections ignore LNG related impacts.
Additions to labour supply through 2024 come from three sources: new entrants (those seeking work for the first time, mainly young adults); individuals who migrate to BC from elsewhere; and people who change occupations, come back to the workforce or postpone retirement.
The good news is that the outlook points to a balanced labour market, where aggregate demand and supply are in rough alignment for most of the projection period. The job market will tighten after 2020, however, putting upward pressure on wages and salaries. Within this overall picture, talent and more generalized labour shortages are expected to materialize in some industries and occupations. I’ll take a closer look at this part of the story in a future blog post.