Government-sector job growth dwarfs private-sector job growth across Canada

Across Canada, headlines suggest the labour market has recovered from the COVID recession. However, a closer look at the numbers complicates the story. According to a new study, since the onset of the pandemic and the associated recession, the rate of net job growth in the government sector has exceeded the private sector in all 10 provinces.

Let’s start by looking at the national numbers. Between the onset of the COVID recession in February 2020 and June 2023, the number of government jobs across the country increased by 11.8 per cent compared to only 3.3 per cent in the private sector (including the self-employed).

In other words, recent job creation in Canada is due to a growing government rather than a thriving private sector. In fact, the private-sector rate of net job growth looks even weaker when we consider that Canada’s working age population has grown quickly during this timeframe.

These statistics raise an important question about the sustainability of recent labour market trends in Canada. A nearly stagnant private sector can’t finance rapid growth in the size of government over the long term. Remember, taxpayers ultimately pay for all new government spending including spending on wages and salaries. This can either take the form of higher taxes or new debt that must be either repaid or financed indefinitely by future taxpayers.

The fact that the rate of net job growth in the government has been faster than in the private sector is a pan-Canadian trend. It’s true in all 10 provinces, although the extent varies considerably by province.

Consider British Columbia and Alberta. From February 2020 to June 2023, Alberta had the fastest private-sector net job growth in the country (6.2 per cent), dwarfing B.C.’s growth rate (0.3 per cent). The situation is reversed if we look at government-sector employment, which includes all levels of government. Like all provinces, Alberta saw an increase in the number of government jobs during this period, but the rate was relatively aligned with the private-sector rate. But in B.C., the number of government jobs exploded, increasing by 22.6 per cent.

As a result, the government sector accounted for more than 90 per cent of the job growth in B.C. compared to only 24 per cent in Alberta. Most of the other provinces are between these two extremes. In Quebec, for example, government-sector job growth (7.6 per cent) was substantially higher than in the private sector (2.0 per cent). Same story in Ontario (11.7 per cent compared to 4.7 per cent).

Taken together, these data illustrate the state of Canada’s labour market. Although there’s significant variation between provinces, across Canada we’ve seen a faster rate of job growth in the government compared to the private sector. This raises important questions about the health of Canada’s private-sector economy, the effect of a growing government payroll on government finances, and the burden on taxpayers.