Stimulus at Work

On Thanksgiving, Canadians can be thankful that public stimulus spending propelled a surprisingly strong labour-market rebound in September. This morning’s release shows full-time employment up and the unemployment rate down. However, the jobs picture is not as rosy as these top-line numbers imply.

Stimulus Working?

The improvement in Canada’s labour market should not be taken as an indication that government stimulus is no longer needed. Rather, it suggests that much-delayed stimulus spending may finally be having a positive effect.

All of September’s job gains were in the public sector. The total number of private-sector employees declined.  This decline was outweighed by a small increase in self-employment and a larger increase in government employees.

Increased employment in construction and manufacturing offset decreased employment in services. A possible interpretation is that the sectors affected by public infrastructure projects strengthened, while those dependant on Canadian consumer spending faltered.

Uneven Improvement

In addition to these sectoral disparities, there were significant gender and regional disparities.

Total employment, and especially full-time employment, declined among adult men. All of the net job gains were among youth and adult women, which may partly reflect the concentration of female employment in the public sector. Despite initial rebounds in male-dominated industries like construction and manufacturing, the “he-cession” is far from over.

Gains were also concentrated west of the Ottawa Valley. Full-time employment increased appreciably in Ontario and every western province but Manitoba. East of the Ottawa Valley, significant losses of full-time jobs in Quebec, Nova Scotia and Newfoundland and Labrador outweighed smaller gains in New Brunswick and Prince Edward Island.

Job Availability

The key question for workers who are unemployed, or at risk of becoming unemployed, is whether they can find another job. Today’s figures make the outlook a little less negative.

However, it is worth noting that two-thirds of the increase in full-time employment was a (welcome) conversion of part-time jobs into full-time jobs. Only one-third translated into an increase in the total number of jobs.

Half of the decrease in official unemployment reflected this employment increase. But the other half reflected a reduction in the labour force. While some workers found jobs, others gave up hope and exited the labour market altogether.

UPDATE (October 10): Quoted by The Toronto Star


  • Some thoughts:
    On a yearly basis a continuing trend, the only significant gains are among self-employed workers + 2.9%.

    Again on a yearly basis all goods producing sectors down, and among service producing sectors a few suprises:
    FIRE up 4.3% !
    Information, culture and recreation up 5.6%
    “Other services” up 5.9%

    And if you lump together Health, social service and public administration you get a gain of 3.3%

    ie less then FIRE (finance, insurance, real estate)

    What housing bubble ? What financial crisis ?

  • As a category “self-employed” workers brings to mind disguised unemployment. Job leavers with a business card and little prospects for maintaining income levels become a big part of the newly self-employed in a downturn. Tax treatment make this designation attractive, as you get to expense an office in the house, meals, travel, books and materials so long as you have prospects of making a profit. Many of these job separations are not voluntary. Others are induced through severance packages. If StatCan were on the ball they would nuance these figures and publish several measures of self-employment, by region, income and age for instance. But, then they do not do job vacancies either.

  • overall, I would say this is a small bit of good news. The one area of concern is the area of growth- being the public sector. We can hope the growth in public sector will help kick start the economy- but it cannot be the engine of growth, at least not under our economic system.

    Is this the so called stimulus at work? Hard to say given it was such a small stimulus. We will find out in the months ahead, as the prvonces have started cutting back, so we should most likely see an eventual drop in public sector employment.

    I wonder how this upswing, in terms of demographics compares with SEPH’s growth fo last month?


  • I hate to say it, but with skilled trades still out of work, rank and files taxpayers, ie, middle class families, will continue to struggle. Men have better wages than women in general. Also the province is shedding public sector jobs. Doesn’t that counter any federal gains?

  • Time to start talking about an exit strategy from the stimulus. Oh, I know, we’re not out of the woods yet. Which is precisely why it’s time to start talking about an exit strategy. As soon as the threat of total collapse is seen to pass, fiscal conservatives, along with “populist” Liberals will start calling for measures to restore balance in the Federal budget (e.g., Jeffrey Simpson in today’s Globe and Mail). So what is the exit strategy? More stimulus? And then what? Below is the comment I submitted in response to David Blanchflower’s column in the New Statesman:


    In the backgrounder to your keynote address in Paris last week you concluded with a quote from Keynes’s biographer, Lord Skidelsky, which included the following observation:

    “”Over time, as the returns on further additions to capital fell, the high-investment policy should yield to the encouragement of consumption through redistributing income from the higher to the lower-saving section of the population. This should be coupled with a reduction in the hours of work.”

    Let’s call that “the exit strategy”. Evidently Osbourne’s stimulus exit strategy is to go cold turkey. The US experience with that approach in 1937 doesn’t bode well. Between September 1937 and January 1938, US industrial production fell as much as it had in the 20 months from October 1929 to July 1931.

    Keynes wrote, in a 1945 letter to T.S. Eliot, that the “ultimate solution” to unemployment was working less. He saw investment as first aid. So, yes, the stimulus is a start. But what are the next steps? More stimulus, then more and more and yet more? What is the exit strategy?

    Keynes proposed an exit strategy: redistribute income and reduce hours. But nobody is talking about that yet. All we hear is, on the one hand, “more stimulus!” and, on the other “restraint!”. I would like to hear your views on the specific exit strategy that Keynes proposed. See, in particular, his 1943 memorandum, “The Long-Term Problem of Full Employment” and, of course, his 1945 letter to T.S. Eliot.

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