Budget Cuts Could Worsen Rising Unemployment

It was not a happy new year for Canadian job seekers. Statistics Canada reported today that unemployment rose for a fourth consecutive month in January. Overall employment remained flat as Canada’s population and labour force grew at a normal pace, leaving more workers without jobs.

The good news in today’s report is that 39,200 more Canadians reported being paid by an employer while 37,000 fewer reported self-employment. Another bright spot was an increase of 10,100 in manufacturing employment, suggesting that the recent rebound in manufacturing output is beginning to translate into jobs. However, manufacturing employment remains near the lowest level ever recorded by the Labour Force Survey.

Many of January’s gains in manufacturing and other goods-producing industries were offset by a loss of construction jobs, highlighting Canada’s vulnerability to a slowdown in housing. Employment plummeted by 44,800 in professional, scientific and technical services, the segment of the service sector that provides the highest weekly earnings. While we do not know precisely which positions disappeared, this substantial loss of jobs in a well-paid area is troubling.

The average hourly wage rose by 2.0% over the past year, not enough to keep pace with inflation of 2.3% (as of the latest Consumer Price Index). Wages edged up by a meagre 1.0% in Ontario, leaving workers in Canada’s largest labour market well behind the rising cost of living.

This uneven data comes as federal and provincial governments are formulating austere budgets. Laying off public-sector workers and cutting public spending that supports private-sector jobs threatens Canada’s soft labour market. Four months of rising unemployment mean that the priority should be job-creation rather than cutbacks.

Erin Weir is an economist with the United Steelworkers union and a CCPA research associate.

UPDATE (February 4): Quoted by yesterday’s The National, Postmedia and Canadian Press

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