More on Declining Labour Force Participation
As a supplement to the excellent (and more timely!) posts from Andrew and Erin this morning, let me add a few points on the most striking feature of today’s Labour Force Survey: namely, the accelerating decline in labour force participation.
The part rate (seasonally adjusted) fell to 66.5% of the working age population (remember, Stats Can defines working age broadly as everyone over 15).Â This continues a trend toward falling participation since the recession hit.Â The pre-recession peak participation rate was 67.8% (reached in spring 2008).
That 1.3-point decline in the participation rate is equivalent to the loss of 366,000 potential workers from Canada’s labour force — compared to what it would have been had the pre-recession participation rate been maintained.Â
This is a key reason why the official unemployment rate vastly understates the true degree of slackness in the labour market.Â If those post-recession non-participants were included in the labour force, the unemployment rate would be 9.2 percent (instead of the official 7.4 percent).Â Throw in involuntary part-time employment and other indicators of underutilization, and it’s clear that Canada’s true unemployment rate is well into the double digits.
The February participation rate was the lowest since March 2002 (a decade ago).Â And it was no higher than the participation rate in1987 (a generation ago).Â That means a quarter-century of rising participation (driven largely by women’s formal participation) has been squandered by the crisis and subsequent non-recovery.
It’s common for participation rates to decline in the wake of a recession and subsequent slow recovery.Â In the early 1990s, for example, the participation rate fell by over 2 points until the jobs recovery really took hold in the last part of that decade.
Canadians aren’t stupid: if there are no jobs, they won’t “actively seek” them, hence they disappear from the labour market.Â That brings down the official unemployment rate (convenient for politicians).Â But the crucial test for society is whether people are working and producing, or not.Â By that score, the languishing employment rate (now back down to 61.6%, just a smidge above the mid-recession trough of 61.3% … and far below the pre-recession peak of 63.8%) is hard proof that Canadian workers continue to face a recession — with a capital ‘R’.