Governor Tiff Macklem addressed the Winnipeg Chamber of Commerce, discussing the labour market's adjustment to higher interest rates and slower economic growth. He emphasized the importance of a strong, inclusive labour market for long-term growth.
Macklem noted that a healthy labour market allows Canadians to find desired jobs, employers to secure needed workers, and wages to grow without causing high inflation. However, post-pandemic economic reopening led to an overheated job market with insufficient workers to meet demand, driving up wages, prices, and inflation.
"We raised interest rates forcefully to slow demand and relieve price pressures," Macklem stated. This approach cooled spending and reduced business hiring while strong immigration helped balance worker supply with demand. The adjustment has been relatively smooth as businesses reduced job postings rather than laying off employees, leading to decreased vacancies without significant unemployment increases.
Inflation has also declined but remains above the 2% target. "With further and sustained easing in underlying inflation in recent months, we are more confident that inflation will continue to move closer to the target,” Macklem added.
The governor acknowledged that some groups face challenges in finding employment due to slower growth. Younger individuals and newcomers are particularly affected; youth unemployment is nearly two percentage points higher than in 2019, and newcomer unemployment is rising faster than the overall rate.
"Even though monetary policy cannot target specific parts of the economy, we need to look at how the job market is affecting different people," Macklem said. Despite low overall unemployment rates close to pre-pandemic levels, certain groups struggle more with job acquisition.
Macklem highlighted Canada's strengths: high labour force participation—especially among women—due partly to affordable childcare and flexible work arrangements; strong immigration attracting global talent; and a robust education system producing desirable workers. However, he pointed out productivity as a key weakness needing improvement for sustainable wage growth without inflationary pressures.
"We need to keep investing in an inclusive labour market, smart immigration, and a strong and accessible education system," Macklem concluded.