We recently passed the 1 year anniversary of COVID lockdowns and shutdowns. With the timeline seemingly changing from moment to moment, no one really knows when this will all end. Just as it seemed our two-weeks to flatten the curve were finally coming to an end, talk begins of a looming third lockdown. After 1 year of COVID where do we sit when it comes to employment? Is our unemployment still at or near record levels? Are people making more money now then they were a year ago? Let’s try and find out.
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If you want to read our first post relating to unemployment and COVID, you can find that here.
February 2021 Unemployment
According to the Labour Force Survey, the number of people employed increased to 18,531,000 and unemployment dropped 1.2% from January and now sits at 8.2%. Sounds like a step in the right direction.
If we compare Feb 2021 to Feb 2020 we are still a long way off from recouping. The good news is our population increased over the last year by almost 1%. The bad news? Well, even with an increased population our labour force is down nearly 80,000 over the last year. A drop of 0.4%. The even worse news? We have more than 519,000 additional unemployed people now than this time last year. We have 1,665,100 official unemployed people now compared to 1,133,800 people a year ago. That is a year-over-year percentage change of 45.3%.
How it is that with an increasing population our labour force can go down? If the population is increasing, that generally means one of two things: more people are being born than those that are dying, or a lot of people are immigrating into Canada. Either way, more people in the country should mean more people willing and capable to work. That is unless all population growth comes from retirees immigrating to Canada, but that seems very unlikely.
If we look back to 1966 there are only two periods where unemployment reached the levels we see today (even after a slight recovery). Those periods are the mid-1980s and the early to mid-1990s. Honorable mention goes to the 2000s and the late 1970s. Please see the chart below.
Labour Force and Participation Rate
We have talked about the inaccuracy of unemployment stats before in our piece Why Unemployment Stats May Be Skewed.
The definition of labour force used by Statistics Canada is, “the employed are persons having a job or business, whereas the unemployed are without work, are available for work, and are actively seeking work. Together the unemployed and the employed constitute the labour force.”
It then goes on to talk about who is not included in the labour force. This includes those unwilling or unable to offer or supply labour services under conditions existing in their labour markets.
The definition used for participation rate is as follows: The total labour force relative to the size of the working-age population. In other words it is the share of the working-age population that is working or looking for work.
In February of 2021 our participation rate is listed as 64.7%. This means, that of every Canadian of working age only 64.7% are part of the labour force. If we compare that to 2020 that is a drop of 0.8%.
Why Unemployment Could be Higher
This is something we have talked about before. The unemployment definition is too stringent and doesn’t encompass the true number of people not working. The definition that Statscan uses says that if someone doesn’t have a job and hasn’t looked in the last 4 weeks they are not part of the labour force anymore. Just because you are unwilling to work should not mean you don’t count as unemployed.
As mentioned if we look at our working age population, 31,216,200, only 20,196,000 are in the labour force. Of those, 1,665,100 are unemployed. This means 18,531,200 are employed, 15,220,500 full-time, and 3,310,700 part time.
The difference between the working-age population and labour force is 11,020,200. Obviously, there are valid reasons for not being part of the labour force: disabilities, child-rearing, early retirement.
We would be hard pressed to believe that there are 11 million people in Canada that cannot have gainful employment due to disability, child rearing, or early retirement.
According to Canada.ca data from 2017, there were ~6 million people age 15 or older with a disability. Let’s be generous and assume there is 7 million today. Obviously, not everyone with a disability is incapable of working. According to an article by globalnews.ca, 1.8 million people in Canada live with a severe disability. So let’s assume that 4 million people with a disability are still capable of working.
This means 3 million of the more than 31 million working-age Canadians have a valid reason. That still leaves more than 8 million people out of the labour force. Well, what about stay-at-home parents? According to PEW Research, 71% of moms work outside of the home. We acknowledge that not all stay-at-home parents are moms, but it is definitely the majority.
Potential Labour Force and Real Unemployment
So what is a reasonable guess for the potential labour force? Well lets assume 3 million live with a disability bad enough where they cannot work. Even if we assume that there are 7 million people that are stay-at-home parents or that have retired early (almost certainly this is on the high side), that still leaves roughly 1 million people in Canada that have the ability to work. However, because of the rigid definition of labour force they aren’t included in the calculation.
So if our labour force increases by 1 million, all of which do not hold gainful employment (i.e., unemployed) it is now 21,196,000. Since those 1 million don’t have jobs, our unemployment figure increase to 2,665,100. Using those numbers, our unemployment rate now increases to more than 12.5%.
If that number were to increase to 2 million people that should be added to the labour force and the unemployed, our unemployment rate would be north of 16.5%. 2 million additional people might be a stretch. It is hard to know with the limited amount of information we were able to find.
However, it is not a stretch to believe that our real unemployment rate is significantly higher than the posted rate. Much like inflation, if the government can present a rosy picture of the current socio-economic landscape it makes them look a lot better.
