One dimension of today’s dismal jobs report that hasn’t received enough attention yet is the continuing slide in labour force participation. It declined again to 67.0 percent (following a bigger decline last month that was the crucial ingredient in September’s counter-intuitive reduction in the unemployment rate).
The participation rate hasn’t been lower since July 2002 — over nine years ago.
Participation peaked at 67.9 percent of the working age population last May, so it’s fallen by almost a full percentage point in 17 months. If we adjust the official unemployment statistics to take account of that decline (which corresponds to discouraged workers who simply give up looking in a labour market that clearly offers no opportunity), our unemployment figures are worse.
At a 67.9% participation rate, unemployment would be 15 percent higher than the current official number (at 1.832 million rather than 1.587 million), and the unemployment rate would be just a hair below 10%.
[Of course, there are other sources of "unofficial unemployment," too, including involuntary part-time workers, students staying in school longer, etc. So Canada's true unemployment rate is already well into double digit terrain.]
Call me old-fashioned, but I think there’s nothing better for people, for families, and for economies than maximum participation in work. Not just for the value that is produced by their labour (and solely by their labour, I might add). But for the personal and social benefits that come from engagement, activity, and self-worth. By the same token, the decline in participation (which is reflected in a reality of isolation, family stress, and depression) is one of the worst and longest-lasting effects of recession.
While I’m at it, here are a few more random musings on the latest nail in the coffin of Canada’s non-existent “recovery”:
I am still amused by the professed “surprise” of Bay Street economists at all this bad economic news that’s come out lately (falling GDP, falling exports, falling employment). Any economist who is surprised by the fact that employment and GDP aren’t increasing today, when the key drivers of private sector expansion (which in Canada are exports and business investment) are clearly contracting rapidly, should be fired because they clearly didn’t pay attention during Macroeconomics 101.
How does growth occur in a capitalist economy? By an initial injection of spending power and activity that comes from a profit-seeking business’s decision to invest. Under globalization, exports become an equivalently important source of initial demand. That spurs production, employment, incomes, and higher-order cycles of spending. Without those initial injections, nothing spontaneously happens.
People may take up doing desperate things to stay alive (selling pencils from a blanket). But that sort of spontaneous self-preservation will never replace the economic leadership that must come (in capitalism) from the captains of industry.
Interventions by government can help to stabilize the economy in the face of sharp declines in private sector activity (and that’s clearly what’s happened since spring). But it would take a heck of a lot more government spending (of the order of magnitude of a war — like the war against fascism that ended the depression of the 1930s, or the war against pollution and poverty that I believe could end this one) to actually replace private sector investment and exports as the engine of growth, and thus lead the economy forward into recovery (not just stabilization).
Failing that, we can expect the economy to keep bouncing painfully along the bottom for a while. Unless we get a genuine turnaround in exports and investment, we could even see further decline (sparked, perhaps, by continuing bloodletting in manufacturing and resources, and/or by new financial crises at key companies).
Why did economists leap so quickly (and prematurely) onto the “recovery-is-here” bandwagon back in the summer?
Perhaps they were unduly influenced by the 0.1% positive blip in June’s GDP (which followed 10 consecutive declines totalling a cumulative 4.5% — the fastest in Canadian history). But scanning charts to try to eyeball a recovery is not economics; it’s “technical analysis” (akin to the quacks who pore over stock market tables with their rulers and their superstitions).
Maybe they honestly believe that private markets (including the labour market) self-equilibrate. Hence the stabilization that was achieved last spring, stopping the post-Lehmen-Brothers freefall, must inevitably be followed by genuine recovery, as supply and demand forces work their magic and put everyone productively back to work again. This was nonsense in the 1930s, and it’s nonsense today.
Or a similar train of thought might be that recovery just naturally follows recession just like day follows night. Forgive my agnosticism on that score.
Maybe it’s true that the left has successfully predicted twelve of the last five recessions. But we sure as hell successfully predicted this non-recovery. The timing of the CCPA report last week that I co-authored with David Macdonald was especially prescient. (I can’t claim it was planned that way: the damn thing took about four weeks longer to finalize than we’d initially planned! But now we look awfully smart thanks to our dithering.)
I am similarly amused by the modifiers that Finance Minister Flaherty and Prime Minister Harper keep attaching to their continuing use of the word “recovery”: it’s “fragile and tentative”, according to Flaherty last week (October 31). It’s uncertain, it’s uneven, it’s slow.
Actually, the recovery is non-existent. Even by the narrowest of definitions (rebounding real GDP), it just ain’t there. You can’t stick an adjective in front of the term “recovery” to describe what is happening out there (unless that adjective is “non-”).
My last bitter twisted cynical kick at the can is this: Despite this dismal news, the TSX is up today, and the loonie (so far, anyway) is pretty much unchanged. Why? Because gold bug speculation has pushed gold to a record, and Canada’s commodity-dependent paper markets are going along for the ride. Rarely will you see a better example of how the paper casinos of Bay Street and elsewhere have virtually nothing to do with real economic activity (that is, people doing actual work, producing actual goods and services), and everything to do with betting on the latest good-looking horse.
We should just stop paying attention to them — if only it were that easy. Unfortunately, I can’t ignore what they’re doing to our dollar, which is one of the fundamental prices in our economy.