ECONOMIC CASUALTIES
Labour participation a concern
There is little doubt the U.S. job engine is outpacing Canada’s labour market, which is struggling to provide employment that is both full-time and well-paid.
“By any standard, recent U.S. job creation is impressive,” says Peter Hall, vice-president and chief economist at Export Development Canada.
“To get a six-month stretch that rivals today’s — with an average monthly gain of 282,000 — you have to go way back to the late 1990s.”
But there remains an overhanging concern, Hall warned in a report Thursday.
“The long-delayed [U.S.] recovery has left a lot of casualties,” he says, caused by “unusually low labour force participation.”
In January, those participating in the U.S. labour market — either working or actively looking for a job — totalled 62.9 per cent of the U.S. population, the lowest rate since the late 1970s. The unemployment rate, on the other hand, was 5.7 per cent during the month.
Highlighting one of the symptoms of the lingering participation malaise in the U.S. job market, the latest Labor Department data show the number of Americans filing new claims for unemployment benefits rose last week to its highest level since May 2014.
On Friday, the Labor Department will publish its February reading of the overall U.S. labour market, including the latest participation level. Economists are again forecasting overall employment growth in excess of 250,000 for a 12th straight month, as well as a slight easing in the jobless rate.
Still, Hall says “there are over 7.5 million would-be-employees in America who are currently sidelined.”
“Granted, the aging of the population means that a lot of these are older workers who simply will not come back into the ranks. But a fair number are recent graduates, unable to get work right away.”
In Canada — where the unemployment rate was 6.6 per cent in January, while participation stood at 65.7 per cent — job seekers face similar obstacles to sustainable employment.
“It’s certainly true that huge numbers of people dropped out of labour force during the Great Recession and still haven’t returned,” says economist Erin Weir, at the United Steelworkers union.
“So, it’s not just a matter of reducing official unemployment, but creating enough jobs to bring people back into the labour force. I think that’s a challenge in both countries.”
Even when they do finally break in to the labour market — or reemerge after periods without work — many find themselves in parttime positions or self-employed. The number of hours they work can also vary widely, depending on the sector and location.
All these factors determine the so-called “employment quality” of Canadians — a trend tracked by CIBC World Markets.
“Our measure of employment quality has been on a clear downward trajectory over the past 25 years,” says CIBC economist Benjamin Tal.
“While the pace of the declaration has slowed in recent years, the level of quality, as measured by our index, is currently at a record low — 15 per cent below the rate seen in the early 1990s and 10 per cent below the level seen in the early 2000s.”
In particular, self-employment “is considered to be of lower quality, simply by the fact that, on average, it pays less than salaried positions,” says Tal.
“Since the late 1980s, the number of part-time jobs has risen much faster than the number of fulltime jobs. The damage caused to full-time employment during each recession was, in many ways, permanent.”
Tal adds: “The fastest growing segment of the labour market is also the one with the weakest bargaining power. That works to weaken the link between labour market performance and aggregate wage gains.”