Canada – The Job Market is worse than it appears

Employment Rate for 25-54 Year Olds

To control for demographic effects, we take out groups that are often still in school (24 years and younger) or can potentially enter early retirement (55 and up). There are other endpoints we can use, but limiting the discussion to 25-54 year olds is the most common approach. Under this measure, the employment rate is at a near all-time high.

This measure would seem to imply that the labour market has consistently improved over the last 40 years, which seems unlikely. What is largely being captured in the 25-54 year old employment rate data is the increased number of women in the workforce.

Employment Rate for 25-54 Year Old Women

One of the most important social trends since World War II is the percentage of working age women in the workforce, which has doubled in the last 50 years.

The easiest way to separate out changes in the employment rate due to the strength of the economy from changes in the employment rate due to social changes is to examine the employment rate for men between the ages of 25-54.

Employment Rate for 25-54 Year Old Men

The employment rate for 25-54 year old men fell during the recession, recovered somewhat, but has been flat over the past few years. It is currently at 84.4 per cent, a level well below Canada’s 1999-2008 average:

There are still a number of other factors we have not accounted for, including job quality. We should account for the possibility of underemployment, where people who could work a full-time job are only working part-time due to the weakness of the labour market.

Full-Time Employment Rate for 25-54 Year Old Men

If we restrict the analysis to 25-54 year old men that have a full-time job, the picture changes somewhat. Outside of the 1992-97 period, the employment rate for this group has been at lows not seen in the nearly 40 years of data that is available:

If I were limited to a single metric to use for the health of the labour market, I would use this one. But limiting ourselves to one measure is ill-advised. There are a number of factors we could still control for, such as the ratio of new Canadians to those born here. We have said nothing about wages and the labour market struggles of new graduates and women are important and not captured here. But to properly analyze the health of the labour market, we need to control for demographic, population size, nature of work and social changes. Simply citing the unemployment rate or the number of people with a job is not enough. But by controlling for these factors, we see that the Canadian labour market is not particularly strong.

Chosen excerpts by Job Market Monitor. Read the whole story at The closer you look, the worse Canada’s unemployment numbers appear.