When a Lower Unemployment Rate is Bad News

Today, Statistics Canada reported an unemployment rate of 6.9% for September. One might have expected Canada’s unemployment rate falling below 7% for the first time since 2008 to be cause for celebration.

But as Statistics Canada noted, the decline in official unemployment reflected youth dropping out of the job market rather than any notable increase in employment. Of course, one would expect many young people to leave the job market as they return to school in September.

However, Statistics Canada adjusts the figures to factor out such routine changes. Today’s seasonally adjusted figures indicate that 21,000 more young Canadians dropped out of the job market than normally would have in September.

One of the reasons young workers may be discouraged is that, since the recession, Canadian employers have added barely enough jobs to keep pace with population growth. The employment rate – the proportion of working-age people with jobs – remains stuck between 61 and 62 per cent, where it was during the worst of the recession in 2009.

Employment changes by industry in September provided a caricature of recent economic trends. The only significant job growth was in finance and resource extraction, offset by a substantial drop in manufacturing employment.

The positive news was a shift from self-employment to positions actually paid by an employer and a shift from part-time to full-time employment in September. That bucked a longer-term trend toward more part-time work. Over the past year, the number of hours worked rose by only two-thirds as much as the number of people employed, with employers expanding part-time employment faster than full-time employment.

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

UPDATE (October 12): I was interviewed on last night’s CTV National News and am quoted in today’s Toronto Star, Hamilton Spectator, Saskatchewan newspapers, and several other newspapers via Canadian Press.

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