Canada’s unemployment rate is at its lowest level since October 2008
Canada’s unemployment rate has finally dropped to its lowest level since the 2008 financial crisis, according to the latest jobs data from Statistics Canada. The economy added 3,200 jobs in April, which pushed the unemployment rate down two notches to 6.5 percent.
Our youth unemployment rate also dropped to its lowest level since September 2008. April numbers show us that while youth unemployment is still uncomfortably high (11.7 percent for those aged between 15 and 24), it’s nowhere near what it used to be almost a decade ago (16.2 percent).
But this really isn’t much of a victory, for two key reasons. First, much of this job gain comes from the fact that many people have basically given up looking for jobs. A person who is no longer participating in the labour force (i.e. not working, and not job hunting either) is not included in the calculation of the unemployment rate. Our current labour participation rate is 65.6 percent, the lowest it has been in over 8 months.
“This was not a great employment report. Many people left the labour force, and participation rates declined to its lowest level since the summer of 2016,” said Michael Dolega, Senior Economist at TD Economics in a note released this morning.
And what’s even more worrying though, says Capital Economics David Madani, is that the decline in the labour participation rate came from young people, those in the 15 to 24 demographic.
“Wages and salaries growth has been sluggish, mainly because of a slowdown in hours worked,” Madani wrote in his morning note.
Which brings us to the second reason why we should be careful of any kind of positive spin related to this month’s job report: part-time versus full-time jobs. In April our economy shed 31,200 full-time jobs, a trend that was in sharp contrast to the gains in full-time employment we saw in both February and March. Moreover, part-time employment soared by 34,300 jobs — not the kind of job growth we should be seeing.
One of the biggest issues facing policymakers in a developed country like Canada is how to keep full-time employment at a sustainable level, given our aging population and a spurt in part-time jobs due to technological change.
This year’s federal budget took some steps, albeit limited in nature, to address the struggle many young people face to find full-time jobs that match their skill set. One such example is the commitment to eliminate unpaid internships in federally regulated sectors when they aren’t part of a formal educational program (i.e. co-op programs).
$225 million has also been pumped into a special project that aims to identify why exactly students, especially Humanities graduates, find it hard to get jobs in their field upon graduation.
Job numbers are a terrific indicator of the health of an economy. The Bank of Canada looks at employment data to determine if it should sustain interest rates at their present level of 0.5 percent, or start raising them. If the BoC starts seeing a positive trend in employment, they’ll be more inclined to raise interest rates.
But that doesn’t seem to be the case for the next little while due to the kind of job growth that has taken place.
“Despite the decline in unemployment, this report is unlikely to encourage the BoC to change its dovish tone on the outlook for the economy and Canadian monetary policy,” wrote Dolega.
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