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Economy Lab

Opposition’s employment math doesn’t add up Add to ...

The Opposition filed a motion in the House of Commons yesterday, and while it didn’t contain much in the way of substance, this particular passage caught my eye:

(a) take immediate action to promote job creation and address the persistently high unemployment rate among Canadian workers, particularly high among young Canadians

There are at least three things wrong with this description of the state of the labour market.

The first is the use of the word “persistently”. As I explained here, what happens in the labour market during an expansion is that jobs are created at a rate that is slightly greater than the number of jobs lost plus the net change in the labour force. Unemployment rates do not drop rapidly during an expansion; they are slowly eroded. And that’s exactly what has been happening over the past two years.

The second is the use of the word “high”. A glance at the history of Canadian unemployment rates (see the accompanying graph) makes it clear that current levels are significantly less than the average rates observed over the past 35 years. Unemployment rates of 7.3 per cent would have been the stuff of dreams two years into previous recoveries.

The third is the reference to youth unemployment rates. Unemployment rates among youth generally average 3.5 percentage points above that of the labour force as a whole, and that’s what we’re seeing now.

Policy recommendations about employment should be based on a realistic assessment of current labour market conditions. And when you put things in historical perspective, current conditions are at least as good as one might expect after two years of recovery.

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