Snap economics quiz: Of the following Canadian cities, which one has the highest unemployment rate?
Oshawa, which was devastated by the scheduled closing of GM’s assembly plant? Windsor, also hit by the shrinking auto industry? Hamilton, whose economic fortunes have fallen in lockstep with those of the North American steel industry? Or Toronto, the economic engine which drives all of Canada?
Er, Toronto, actually.
Yes, at 6.3 per cent as of May, Toronto’s unemployment rate is higher than the rate in Oshawa (5.3), Windsor (5.7) and Hamilton (4.3). It’s also higher than the rate in Montreal (5.6), Winnipeg (5.2), Saskatoon (6.0), Vancouver (4.3), the national average for Canada (5.4) and the provincial average for Ontario (5.2).
The reasons are many, and, ironically, many are tied to the city’s success.
Because the city is seen as the place to go when you’re looking for work, it attracts a lot of unemployed young people and recent immigrants to Canada.
The problem is, once they arrive, finding work isn’t always as easy as they expected.
“Toronto has always been higher than the national average,” said Ryerson economist Amy Peng. “There are more young people and immigrants in Toronto than many other cities, and those are groups which have higher unemployment.”
In the 15 to 24 age bracket, unemployment has typically ranged between 16 and 17 per cent, Peng pointed out. For people more likely to be in mid-career, it’s in the low single digits.
At 39.7 years old, the average Torontonian is younger than the average resident of many other major Canadian cities, including Windsor (41), London (40.9) and Saint John (42.9), according to the most recent census data from Statistics Canada.
Cities with higher average ages also tend to have more retirees than cities with a younger population. And retirees don’t count at all when it comes to Statistics Canada’s monthly labour force survey, said Robert Kavcic, senior economist at BMO Capital Markets.
“If people have removed themselves from the labour force, either because they’re retired or their prospects are crappy, that will make the unemployment rate lower, but that doesn’t mean it’s a great place to go for jobs,” Kavcic said.
The typical Toronto resident also has a commute to work which is longer than almost anywhere else in the country, at an average of 34 minutes.
And that, says Brandon Schaufele, a professor of business economics at Western University’s Ivey School of Business, keeps people from even applying for some jobs.
Call it a geographic mismatch. Schaufele used the example of a job-seeker living in Scarborough who has the right skills and aptitude for a well-paying job that’s unfilled in Mississauga.
“If I’m looking at that job, is it worth that $2-wage premium if it’s taking me one-and-a-half hours each way to get there? That’s an extra $80 or so a week before tax. If you’re driving, you’d probably spend at least that much more on gas,” Schaufele argued.
(In London, where Western University is based, the average commute is a relatively breezy 22 minutes.)
Toronto’s high unemployment rate can seem puzzling, because, in many sectors there’s a shortage of labour. That, says Peng, means there’s likely a mismatch between the skills job-seekers have and the positions employers are looking to fill.
“If a city like Toronto has a historical problem of high unemployment, combined with a labour shortage problem reported by firms, it means that the skill mismatch gap (is) high as well,” said Peng, who pointed to several Bank of Canada surveys of businesses citing a shortage of potential employees.
Better training for young people, as well as more readily recognizing newcomers’ credentials and on-the-job experience in their home countries would help reduce the unemployment rate, Peng argued.
Still, despite a higher rate than the national average, unemployment in Toronto is far from disastrous, said Kavcic.
“This is a strong labour market here in Toronto,” said Kavcic. It’s just that some of that strength might not be showing up in the official numbers.
With the cost of living so much higher in Toronto than in surrounding areas, a lot of people working in the city actually live in nearby cities. And those people’s employment status shows up in the data for the city where they live, not the city where they work.
“What we’ve seen over the last few years is a lot of the employment strength in Toronto actually showing up in places like Hamilton, Barrie or Kitchener,” said Kavcic.
Josh Rubin is a Toronto-based business reporter. Follow him on Twitter: @starbeer