Background

In Canada and the US unemployment rates are dropping and indicating that the
labour market is recovering from the 2008 recession. However, Statistics Canada
recently produced a paper and The Bank of Canada wrote a report on the health of
the Canadian Labour market since the 2008 recession. The report and the paper
recognized that the unemployment rate alone is not a good enough indicator of the
health of the labour market as it does not show all the information necessary to
evaluate the labour market. These reports showed a lot about the actually health of
the labour markets.

Although the Canadian and US unemployment rates have both been dropping
since they spiked during the recession, the Canadian unemployment rate
adjusted to be comparable to the US system is still much lower than the
American Unemployment rate.
Employment losses in the US were more than double the losses in Canada
and lasted longer
In both Canada and the US the employment rate for youth (16-24) has
declined by 5% and 6.6% respectively since before the recession. This
decrease is much higher than that of the overall employment rate
Many other indicators of labour market health show that the Americans are
still lagging behind Canada. Labour force participation rates (LFPR) in both
countries are dropping and this is causing the unemployment rate to be
understated giving a false impression that economic conditions are improving
more than they actually are.
o In Canada much of the drop in labour force participation rate can be
attributed to changing demographics as the LFPR for the working age
population (25-54) has stayed steady
o In the US both the overall LFPR and the working age LFPR have been
decreasing indicating that the drop in LFPR is not caused by
demographic change and that people in the US are leaving the labour
force
In both Canada and the US, long term unemployment spiked after the
recession, but this rise was much greater in the US than in Canada where at
its peak almost half of the unemployed had been out of work for longer than
27 weeks although it has been gradually declining
Separation rates in both countries are back to around pre-recession levels,
but the job-finding rate in both countries has recovered slower.
The Labour Market Indicator (LMI) used by the Bank of Canada to show the
health of the labour market compared to the unemployment rate shows that
in Canada there was a slight overstatement in the extent of economic
recovery. The US on the other hand shows a much higher overstatement of
the post-recession labour market recovery

Overstatement in the Canadian market is largely attributed to the lower job-finding

rate and the increases in long term unemployment since the last recession. Both of
these, as well as the labour rising labour underutilization rate and the prime age

LFPR decreasing are causing the much larger discrepancy between LMI and
unemployment.

Implications
The Bank of Canada report and the Stats Canada paper both show that the health of
the Canadian is better than that of the US, but our recovery has still been over
stated. One of the big concerns for Canada is the increase in the amount of long
term unemployment post-recession. The long term unemployment rate is yet to
drop back to levels before the recession. This is a problem for Ontario as people that
stay unemployed for a long time can become a drain on the economy. People that
stay out of work for long periods of time may find that their earnings decrease when
the do find work. On top of that, it can become increasingly difficult to find a job the
longer you have been unemployed as employers often attach a stigma to people
that have been out of work for long. Another concern for the labour market is the
job finding rate, which has actually decreased in the past year down to only just
slightly better than the lowest level during the recession. The connection between
the job finding rate and long term unemployment is unmistakable. People are being
laid off or fired and are then having difficulty finding a new job which could be the
reason why long term unemployment is recovering more slowly than overall
unemployment. Another issue for Ontario is the low employment rate for young
people. Coupled with the low job finding rate and the high long term employment,
the low employment rate for youths indicates that there is a shortage of jobs. While
the decreasing separation rate shows that less people are being fired or laid off, the
combination of the other three indicators shows that the province is having trouble
providing jobs for people. Most of the economic indicators show that the economy is
recovering, but the combination of the three others imply that this is less of a
recovery and more of a stabilization. The economy is no longer in recession and we
are no longer losing jobs, but the three others show that we still arent creating
enough jobs to satisfy the demand. The Ontario government needs to implement
policies to create more jobs as more and more young people enter the labour force
looking for jobs.