Summertime Blues for Canadian Workers
My assessment of todayâ€™s Labour Force Survey follows:
Devastating Loss of Full-Time Jobs
Canada lost 39,000 full-time jobs in June. While 34,000 of these positions were replaced with part-time jobs, 2,000 more Canadians entered the workforce, swelling the ranks of the unemployed by 7,000. One hopes that the Bank of Canada will respond to this labour-market downturn by cutting interest rates on Tuesday.
Troubling Unemployment Trend
June was the fifth consecutive month in which the number of unemployed workers increased. This total (1,124,000) has now reached its highest level since September 2006. The unemployment rate rose to 6.2%.
This trend should prompt the Government of Canada to revisit its recent decision to hive off Employment Insurance (EI) into a separate fund without a financial reserve. If unemployment continues to rise, the programâ€™s administrators may be forced to hike EI premiums or cut EI benefits, which would be the worst possible response to the labour-market downturn.
The old EI fund had an accumulated surplus of $54 billion. This fundâ€™s former chief actuary estimates that $10-$15 billion would be needed to maintain benefits without premium increases during a recession. However, the federal government opted to create a new EI fund with only $2 billion. Even this inadequate amount is not a real reserve, since the fund is required to maintain a $2-billion balance every year.
Ontario Hit Hardest
The problems afflicting Canadaâ€™s labour market were most severe in the largest province. In June, Ontario lost 46,000 full-time jobs but gained only 22,000 part-time jobs. Although 1,000 Ontarians dropped-out of the workforce altogether, unemployment rose by 23,000. The provincial unemployment rate jumped from 6.4% to 6.7%.