Labour Force Numbers Worse Than They Look

Today’s Labour Force numbers provide more evidence that Canada’s labour market is still mired in a 3-year funk.  Following one year of decent recovery from mid-2009 (the trough of the recession) to mid-2010, driven mostly by extraordinary monetary and fiscal stimulus, further progress has been stalled ever since.

Most headlines focus on the unemployment rate, but that is a misleading indicator — especially during sluggish times (when many workers give up looking for non-existent jobs, and hence disappear from the official unemployment rolls).  The Canadian unemployment rate rose to 7.2% in July, and is now just a smidge below the U.S. rate (7.4%).  Conceivably those two lines could cross imminently, casting some additional symbolic doubt on the Harper government’s broken-record claim that Canada survived the recession much better than other industrial countries.  As previously noted, adjusted for population, Canada’s labour market performance since 2008 has clearly been worse than most other industrial countries.

The employment rate is a better indicator of labour market performance (relative to population trends), and by that measure July’s performance was even worse than the headline unemployment number seems to suggest.  Labour force participation declined one-fifth of a percentage point in July; its decline has continued despite the so-called “recovery.”  Indeed, at 66.5% of the working age population this month’s participation rate (tied with April) is now at the lowest level since early 2002.  This exodus of workers from the formal labour market helps to artificially supress the official unemployment rate.

The employment rate also declined a fifth of a point, to 61.7%.  That’s lower than June 2010, the level reached after just the first year of stimulus-fueled recovery (and not much better than the miserable 61.3% recorded at the trough of the recession).  Summer of 2010 is when governments shifted from stimulus to austerity, and the recovery stalled.  (Erin Weir’s post today illuminates the strong link between austerity and the falling employment numbers.)  Job-creation for the past 3 years has only just kept up with population growth.  The decline in the unemployment rate over the past three years is thus purely due to Canadians abandoning the labour market in droves.  That’s hardly an accomplishment; it implies isolation, inactivity, and poverty.

At the pre-recession participation rate (67.8%), July’s unemployment rate would have been over 9%.  Add in involuntary part-time workers and other pools of hidden unemployed (eg. those waiting for a job to start), and Canada’s true unemployment rate is over 12% — or over 2.3 million people.

The painful reality is this:  Labour is not scarce; jobs are scarce.  And Canada’s labour market is not healthy; it’s been stalled in recession-like conditions for years.  So much for the myth of Canadian exceptionalism.