The Canadian labour market may seem sturdy, but under the surface, some measures such as long-term unemployment and levels of involuntary part-time work remain elevated.
Both indicators, which rose after the recession and stayed high, were flagged in a Bank of Canada speech last week as examples that indicate slack – or unused capacity – in the labour market.
They give a more nuanced picture of what’s happening in the labour market, given that Canada’s unemployment rate of 7 per cent is unchanged from a year ago. These other measures suggest the country isn’t using its labour pool to full potential.
Underemployment has increased as many people are stuck in part-time positions when they would prefer full-time work. Long-term unemployment is a particularly sticky challenge as research has shown the longer a person is out of work, the more difficult it is to re-enter the job market as skills atrophy, networks grow stale and stigma grows from being jobless.
“They’re two indicators of a similar dynamic in the labour market: not using those who want to work to their full capacity. They’re both worrying trends,” said Robert Fairholm, partner and economist at the Centre for Spatial Economics in Milton, Ont.
The share of Canadians out of work for longer stretches of time has grown. The proportion of people without work for 27 weeks or longer has risen to 19 per cent of the total unemployed, compared with a share of 11.9 per cent in January, 2008.
And the average spell of unemployment is becoming longer. In January, the average was 20.6 weeks, up from 19.5 weeks in the same month last year, and 14.3 weeks seven years ago, Statistics Canada data show.
StatsCan’s broadest measure of unemployment, which includes discouraged workers and part-timers who would rather be full time, is 10.6 per cent, little-changed from a year ago, when it was 10.7 per cent.
In a speech on Friday, Bank of Canada senior deputy governor Tiff Macklem noted that slack in the Canadian economy “remains significant,” and that labour productivity is also below its historic average.
Other labour market indicators also point to slack, he said, citing involuntary part-timers and unemployment duration as examples of measures that are still elevated.
The federal government, set to unveil the 2014 budget on Tuesday, often trumpets the creation of more than one million net new jobs since the recession, though the unemployment rate remains higher than it was before the financial crisis. In the past year, the jobless rate has moved sideways, Mr. Fairholm said, suggesting “a tepid labour market – things are not really improving dramatically and they’re not deteriorating dramatically.”
Although there has been modest job growth, it has differed among age groups, with older workers seeing employment gains in recent years while young Canadians have seen little improvement. The federal budget is expected to include measures that will help young people land work, in a demographic group whose jobless rate is 13.9 per cent.