Overview
| Name | 3-year Employment Outlook |
| Author | Employment and Social Development Canada, Labour Market Information Division
Service Canada |
| Contact | NC-LMI-IMT-GD@hrsdc-rhdcc.gc.ca |
| Timing | 3-year forecast, updated every year |
| Outputs | Job Bank Trend Analysis |
The ESDC 3-year Employment Outlook estimates job demand for the 500 occupations of the 4-digit National Occupation Classification (NOC) by province, territory and economic region, data permitting.
Methodology
The 3-year Employment Outlook is based on a model developed by ESDC and Service Canada regional economists. It uses data sources available in all regions, proven statistical techniques, and significant analytic support from labour market specialists active in each economic region. The objective of the methodology is not to measure imbalances but rather to assess whether the employment outlook for a given 4-digit occupation, within a specific province or economic region, is good, fair or limited. ESDC is the only organization in Canada to produce outlooks for all occupations and regions, covering all of Canada, on an annual basis. The period of 3 years was chosen for the forecast because 5 or 7 years could potentially overlap two economic cycles and would be too close to the 10-year forecast done by the COPS model.
Data Sources
Four indicators serve as the foundation of the outlooks exercise. Each indicator is calculated for each of the 500 NOCs by province, territory, and economic region, data permitting (it is not calculated at the national level).
Labour Demand
Indicator 1: Employment Growth Rate
To estimate the average annual employment growth rate for the 3-year forecasting period, first, an industrial employment forecast is developed at the provincial and economic region levels. This forecast is based on a custom industrial structure developed to take into account the main sectors of the provincial or regional labour market.
Second, this industrial employment forecast is used to estimate occupational growth based on detailed information available regarding the occupational composition of labour within each industry.
Third, these occupational projections are adjusted to take into account the impact of structural changes, such as new technologies or new ways of organizing work, as well as situational factors related to economic cycles.
The statistical technique used to estimate these yearly matrices is called Maximum Entropy, which provides a constructive criterion for setting up probability distributions (i.e., matrices) on the basis of partial knowledge. It allows for estimating missing values when disaggregating data to achieve more granular levels, such as detailed NOCs within each economic region. The constraints used to perform this function are the known data at the aggregate level (employment by industry and occupation from the Labour Force Survey [LFS]) and the base coefficient matrix from the census.
Last, a series of regressions are used to establish variable coefficients, which allow for adjusting entropy estimates to reflect long-term employment trends within each occupation.
Indicator 2: Replacement Needs Rate
The total number of projected retirements and deaths for the 3-year forecasting period is estimated. This indicator is defined as the ratio of estimated attrition (retirements and deaths) over the projection period, in relation to the total employment projected for the same period.
The forecast of replacement needs by occupation is performed in two steps. First, a global estimate of replacement needs is done for the province using demographic data. This global estimate is then distributed across occupations on the basis of attrition rates from the Canadian Occupational Projection System (COPS) model, available at the national level, and the age composition of each occupation from the census.
Labour Supply
Indicator 3: Experienced Unemployed Workers Index
The number of experienced unemployed workers at the beginning of the forecast period, expressed as a percentage of employment during the same period and weighted by the relative length of the benefit period, is estimated.
The indicator is determined using Employment Insurance administrative data collected by ESDC. A series of calculations are undertaken in order to obtain detailed estimates by economic region and province. In particular, the process involves dividing the number of beneficiaries by the average three-year projected employment levels for each NOC.
Composite Indicator
Indicator 4: Net Needs
Net needs is a composite indicator based on the results of the three preceding indicators. It is calculated by summing, for each NOC, province, territory and economic region, the average employment growth (indicator 1) and replacement needs (indicator 2) during the forecast period to determine gross needs. Subtracting the average number of available experienced workers at the beginning of the period (indicator 3) using the average number of beneficiaries for the three most recent years is the next step. The sum is then divided by the average employment during the forecast period to express the indicator as a rate.
The indicator corresponds to the total needs (due to growth, retirement and death) over the forecast period that cannot be satisfied by experienced unemployed workers available at the beginning of the period. As the only level indicator - and the only one where all three elements are considered together - it provides some balance.
Identification of Imbalances
As mentioned above, the Employment Outlook does not seek to measure imbalances but rather to assess whether the outlook for a particular NOC within a specific province, territory or economic region, is good, fair or limited. This is determined using a four-step approach.
Step 1: Establish a Frame of Reference
Using Statistics Canada’s demographic projections and the LFS, a first analysis of the current and projected labour market situation is conducted. It includes a number of elements, such as the following:
- A preliminary global (macroeconomic) scenario (e.g. COPS, consensus from financial institutions, etc.)
- Demographic projections (Statistics Canada, provincial governments, custom projections)
- Labour market indicators by age group (total population, labour force, employment, unemployment, participation rate, employment rate, unemployment rate)
Step 2: Generate Mechanical Results
Once the four indicators are computed for each occupation, each is given a rank of 1 to 6. This score is determined at the provincial level by assessing the data over a historical period of 10 years, where possible. These results are then placed in order from the best situation to the worst and divided into six equal groups, taking note of the threshold (lower-end) values for each group. A rank of 1 is associated with occupations in the group with the best situation, and so on, with 6 being the worst. The results for the forecast period are then compared to the historical thresholds and the corresponding scores are attributed.
Example: Scorecard for a Sample Occupation (Fictitious)
| Rank | Final Rank | |
| Employment growth rate | 1 | 9 |
| Replacement needs rate | 1 | |
| Experienced unemployed workers index | 4 | |
| Net needs | 3 |
The scores of all indicators are summed (total of 4 to 24) and the final outlook is determined from the total. Finally, the outlook’s status (good, acceptable, or limited) is attributed by applying the following table:
| Final Rank | Outlook |
| 4 to 10 | Good |
| 11 to 17 | Acceptable |
| 18 to 24 | Limited |
At this stage, some occupations may be assigned an indeterminate rank if the indicators are not reliable.
Step 3: Validate Mechanical Results
Several partners and documents are consulted to validate the mechanical results. Any final changes are justified and the rankings standardized to ensure that the adjustments do not create inconsistencies among the regions or any established ranking for the province. Consultations include the following:
- Service Canada’s regional economists validate each outlook throughout the process and, at the end, the outlook status
- Feedback is sought from provincial and territorial counterparts
- Alternative quantitative and qualitative data sources (e.g., Survey of Employment, Payrolls and Hours, Job Vacancy and Wage Survey), administrative data (e.g., Employment Insurance, Job Bank data on job postings), labour market news, research reports by industry and labour organizations are consulted to validate results
Step 4: Develop Trends Statement
Once the mechanical results have been validated, the next step is to develop trends statements (short explicative text) that accompany the outlook status on the Job Bank website. These trends statements often include information related to the indicator scores as well as information gathered by the economists during the validation stage. Trends statements include contextual information on the factors behind the call, as well as key statistics associated with the occupation.
Applications
The 3-year Employment Outlook results are used in many different contexts.
Individual Canadians
Individual Canadians making career decisions can access the results through Job Bank’s trend analysis.
Employment and Immigration Policies and Programs
- Results are used by Temporary Foreign Worker Program (TFWP) officers to assess program applications from employers.
- Results are used by employers when developing their applications to the TFWP program.
- They are also used by Immigration, Refugees and Citizenship Canada programs to assess immigration applications and provide guidance for newcomers in exploring opportunities in the Canadian labour market.
Education Policies and Programs
- Results are used by high school career councillors.
- Colleges and universities use the results to evaluate existing programs and plan for new curriculum.
Economic Development Policies and Programs
- The data is used to respond to ad hoc requests from external clients seeking to determine the economic viability of a business initiative.
- Results are used to respond to requests from other federal departments.
- Academic research on the labour market is also facilitated by the data.