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Economy Lab

Jobless rate masks key flow in and out of work Add to ...

When Statistics Canada released the results of the April Labour Force Survey, I noted that the dynamics of the labour market were such that it would take several years before unemployment would return to pre-recession levels. This month, I'm going to explain why those same dynamics make that estimate less depressing than it might appear.



There were 1.563 million people unemployed in May, 2010, and according to today's LFS release, there were 153,800 fewer Canadians looking for work in May 2011. But that doesn't mean that there are 1.410 million people who were looking for work a year ago and who are still unemployed. Those headline numbers mask the large flows of workers in and out of employment that are an important -- if little-known -- feature of the Canadian labour market.

Statistics Canada also asks how long people have been unemployed: there were 154,600 people in May who had been out of work for 52 weeks or more. In other words, roughly 1.408 million people -- or 90 per cent of those unemployed in May 2010 -- found work within a year. Similar calculations suggest that 79 per cent of those who were unemployed in November, 2010, had found jobs by May, as had 65 per cent of those who were jobless in February.



Roughly half of unemployment spells are 13 weeks or less. (The average duration is 19 weeks, since it takes into account a small number of very long duration spells.) The corroding effects of long-term unemployment are real enough, but many Canadians may be confusing reports from the United States with the situation at home.



These numbers are back-of-the-envelope estimates that omit discouraged workers and new entrants into the labour force; a proper study would require access to individual files. But they should be enough to dispel the image of a static pool of unemployed whose numbers are being reduced at a painfully slow rate. Most unemployed people find work more quickly than what the gradual reduction in the total number of unemployed would suggest.

Unemployment by duration



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