Labour market health may be overstated

OTTAWA — Canada’s official unemployment rate is among the most watched economic indicators by markets and policy-makers, but it may be overestimating the actual health of the country’s labour market, according to the Bank of Canada.

OTTAWA — Canada’s official unemployment rate is among the most watched economic indicators by markets and policy-makers, but it may be overestimating the actual health of the country’s labour market, according to the Bank of Canada.

The central bank says in a new research paper that unemployment rates have “overstated” the jobs recovery in Canada and particularly in the U.S. because they fail to capture a complete picture of what is happening in the labour market.

In the paper, the bank creates a composite labour market indicator, or LMI, that combines a broad range of measures to paint what it says is a more accurate picture of what has occurred since the 2008-09 recession.

The LMI, which includes less publicized indicators such as hours worked, wage growth, long-time unemployment, labour underutilization and other data points, resolves one of the puzzles of current statistics that has the U.S. unemployment rate at 6.3 per cent, well below Canada’s 6.9 per cent, even though by all other measures the U.S. labour market is far weaker.

But it also shows Canada’s jobs recovery, while stronger than in its southern neighbour, has not been as strong as the unemployment rate would suggest.

Between 2010 and 2013, the bank says Canada’s jobless rate fell 0.9 percentage points. But the LMI fell only 0.5 percentage points in the same period, suggesting more softness in the labour market than reflected in the official unemployment rate.

“Although the unemployment rate in Canada has evolved largely in line with overall labour market conditions since the recession, the article has shown that it may have modestly overstated the extent of recent improvement,” the research paper notes.

“This article highlights the need to consider a broad range of labour market variables in addition to the unemployment rate.”

The paper was one of five issued by the central bank Tuesday on the economy and financial markets, including reports on the increasing use of the loonie as a global reserve currency and on digital currencies.

Canada’s impressive job creation record since the recession has been a key talking point among Conservative government ministers to back their economic management, including until recently, support for importing temporary foreign workers to meet labour shortages.

But there has also been discordant voices, including from the Parliamentary Budget Officer, that suggest labour shortages have been exaggerated. Recently, the government radically revised downward it’s estimate of job vacancies by dropping job postings from Kijiji after the PBO called the data unreliable.

Employment Minister Jason Kenney suggested this week in the House of Commons that there are no postings listed on the federal government’s controversial job bank website that are older than six months. He said the normal maximum posting period is 30 days, even though – when checked – many of the jobs listed on the job bank are no longer available.

The new Bank of Canada research suggests that while by some measures Canada’s labour market has recovered, by others there’s still a long way to go.

“The percentage of unemployed workers who are considered long-term unemployed … peaking at just over 20 per cent in June 2011 … has not shown much improvement. . .” the bank notes. As well, “job-finding rates,” after an initial improvement following the slump, have “since fallen back to a level only slightly above the low point witnessed during the recession.”

In other research paper, the bank notes that the loonie has gained in prominence as a global reserve currency since the recession.

It calculates foreign governments now hold about US$200 billion in Canadian currency, almost twice the IMF estimate, or about 1.8 per cent of the total world reserve holdings.

The global confidence in the loonie, which is backed by relatively low levels of government debt, has resulted in lower bond yields and reduced Ottawa’s interest payments more than otherwise would have been the case. But increasing use of the loonie as a reserve currency can also reduce market liquidity, the bank says, which can also cause bond yields to rise.

The bank also examined the growth of so-called digital currencies, such as the Bitcoin and Amazon coins, concluding that while they have the potential to challenge more traditional currencies, none is widely used at the moment.

Just Posted

Property taxes in Red Deer will go up 2.02 per cent in 2018

City council passes a “tough” budget that maintains most service levels

Red Deer councillor balks at city getting stuck with more provincial funding responsibilities

Volunteer Central seeks municipal funding after being cut off by FCSS

Olds chicken barn burns to the ground, no livestock harmed

More than 100,000 chickens were saved as fire crews prevent the blaze from spreading

Bear video meant to promote conservation: zoo owner

Discovery Wildlife Park says it will look at other ways to promote its conservation message

Red Deer’s Soundhouse closing its doors on Record Store Day

The owners of The Soundhouse want to shut down their store on… Continue reading

NorAm Western Canadian Cross Country Ski Championships begin in Red Deer

The biggest cross-country skiing competition in Red Deer’s history is underway. Nearly… Continue reading

In photos: Get ready for Western Canadian Championships

Haywood NorAm Western Canadian Championships and Peavey Mart Alberta Cup 5/6 start… Continue reading

WATCH: Red Deer city council debates cost-savings versus quality of life

Majority of councillors decide certain services are worth preserving

Got milk? Highway reopened near Millet

A southbound truck hauling milk and cartons collided with a bridge

Stettler’s newest residents overcame fear, bloodshed to come here

Daniel Kwizera, Diane Mukasine and kids now permanent residents

Giddy up: Red Deer to host Canadian Finals Rodeo in 2018

The CFR is expected to bring $20-30 million annually to Red Deer and region

Ice dancers Virtue and Moir to carry flag at Pyeongchang Olympics

Not since Kurt Browning at the 1994 Lillehammer Games has a figure… Continue reading

Beer Canada calls on feds to axe increasing beer tax as consumption trends down

OTTAWA — A trade association for Canada’s beer industry wants the federal… Continue reading

Most Read

Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month