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The Globe and Mail

Canadian job data point toward demographic shifts

Canada’s labour participation rate, the amount of people who either have or are looking for employment, is at its lowest point in 13 years and the available data are unclear about what exactly is causing the trend.

Matthew Sherwood/The Globe and Mail

If Friday's jobs report is anything like the recent past, then analysts won't just be looking at the latest unemployment numbers.

Canada's labour participation rate, the amount of people who either have or are looking for employment, is at its lowest point in 13 years and the available data are unclear about what exactly is causing the trend.

Most of the attention for monthly jobs data focuses on two numbers: the unemployment rate and the net change in jobs.

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Economists surveyed anticipate 24,000 net jobs created for July, which would hold the unemployment rate steady at 7.1 per cent. That jobs data would be an improvement over last month, when the initial report showed a surprising net loss of 9,400 jobs in June.

But the participation rate has gained increased attention over the past few months, in part because the U.S. rate is at a worrisome 36-year low.

"Ideally, you would like rising long-term labour participation and see that translating into jobs," says Vincent Ferrao, an analyst for Statistics Canada.

But that's not happening. Statscan data show the participation rate going in the opposite direction. At 66.1 per cent, it's been on a mostly downward trend since 2008, and is at its lowest level since November, 2001.

Mr. Ferrao adds that Canada saw downward pressure on the participation rate in the aftermath of the 2008 banking crisis, and that the numbers haven't increased since then.

Historically, the participation rate tends to decline during periods of poor economic performance, as potential employees might seek more education and training, or become discouraged by the job-seeking process and drop out of the labour pool.

But there can also be longer-term demographic shifts that explain variations, such as when the 1970s saw a rise in the participation rate due to women joining the workforce in large numbers.

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One such explanation was seen in a July study by the White House's Council of Economic Advisers, which suggests that half of the decline in the American participation rate over the past seven years is due to an aging population.

Mr. Ferraro says that while Statscan doesn't have the numbers to determine what proportion of the Canadian participation rate decline is due to an aging population, it is undoubtedly a factor.

Thomas Klassen, a professor at York University who specializes in labour and retirement, says that all else being equal the participation rate will continue to fall as baby boomers enter retirement.

"Older people are not as likely to work as those in [their] 30s and 40s, but far more likely to work than older people a decade or two ago," Prof. Klassen writes in an e-mail.

He points out that while the participation rate has seen an overall decline, it has significantly increased among those who would typically retire. People 65 to 69 participated in the work force at an 11.8 per cent rate in 2001, but that number has more than doubled to 25.5 per cent by 2013.

"The economy and workers have both adjusted to the demographic trend, helped along by government policy," added Prof. Klassen. He points to policy changes like eliminating mandatory retirement at age 65, noting that there has been a shift among those in the 65 and over demographic doing part-time work.

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The demographic shift of an aging work force has also had an impact on younger individuals entering the job market. As of 2012, the participation rate for 15 to 19 year olds dipped lower than 50 per cent for the first time since 1998.

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