Unemployment Rate Overstates Jobs Recovery in Canada, US: Bank of Canada
The Bank of Canada says the labour market recoveries in Canada and the United States since the recession are likely overstated, suggesting improvements in the unemployment rate may have exaggerated the performance of both countries.
Canada’s unemployment rate may have “modestly” overstated the extent of the labour market’s improvement, while the US rate may have “significantly” overstated them, the Bank of Canada said today in its spring 2014 review.
The Bank of Canada released five articles as part of its review. Among them was a report on the Canadian and US labour markets, which were prepared by analysts Konrad Zmitrowicz and Mikael Khan.
“Although unemployment rates in both countries are down significantly from the sharp increases seen during the recession, the recovery in labour markets remains incomplete,” the article read. “For example, an unusually large share of the unemployed have been out of work for six months or more, and many workers who would like to work full time have been able to obtain only part-time employment.”
Canada’s unemployment rate fell to 6.9 percent in March, a pre-recession low, as overall employment increased 42,900. Overall employment declined 28,900 the very next month, underscoring a prolonged period of volatility in the Canadian labour market. The April reading defied expectations the labour market was beginning to improve after a rocky winter season.
“There has been little overall employment growth in Canada since August 2013,” Statistics Canada said in its latest employment report.
At the height of the recession in August 2009 Canada’s unemployment rate was 8.7 percent, up from 5.9 percent in February 2008. The recession of 2007-09 resulted in the loss of 430,000 Canadian jobs.
In the United States, job creation has averaged 238,000 over the past three months, with April registering the fastest monthly pace of job creation in more than two years. The unemployment rate fell from 6.7 percent to 6.3 percent as even more Americans exited the labour force.
The US unemployment rate peaked at 10 percent in October 2009, up from a low of 4.4 percent in May 2007. The 2007-2009 recession destroyed 8.7 million jobs in the US.
Today’s report escalates the debate about the state of the labour markets in both countries. In Canada, the government department responsible for collecting employment data came under scrutiny last week after the Auditor General said the labour force survey was too vague and offered little value to Canadian job-seekers.
Job creation has been one of the central pillars for the Conservative government, which has used labour force survey data to benchmark its success since securing a majority government in 2011.
In the United States, Federal Reserve Chair Janet Yellen, among others, has repeatedly stated the unemployment rate is an incomplete measure of the labour market’s performance. Labour force participation in April fell back to 36-year lows. underscoring concerns about the validity of the gauge in assessing the health of the labour market.
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