Federal cuts could push unemployment to 8%

Last Monday, the CCPA released my paper, The Cuts Behind the Curtain, which examined some possible scenarios for how the conservative government might cut $6 billion from program spending over the next 3 years.  The $2 billion from the 2010 program freeze and $4 billion from the 2010 Strategic & Operation reviews, in addition to the 6,300 jobs already slated for loss from the 2007-2010 Strategic Reviews, could add up to job losses of between 60,000 to 68,000 full time positions by 2014-15.

What a difference a week makes.  New Information has come to light that the government cuts will not be $4 billion for the Strategic and Operating reviews, but rather double that at $8 billion.  In addition, the cuts will be compressed into 2 years.  To top it all off, it now appears that departments will not be as protected as I had initially imagined.

Take all this new information, toss it into a blender (or rather a massive spreadsheet) and a much darker image emerges.  Potential job losses with an $8 billion Strategic and Operating review (and all the other overlapping cuts) now drive job losses to between 99,000 and 108,000 full time positions across Canada.  At this much higher level, the federal government could be single-handedly responsible for pushing national unemployment from its current 7.5% to 8.0%.  About half of those losses would be federal public servants and half would be in the private sector (crown corporations, non-profits and government contractors).

At the same time, a very recently obtained ATIP request reveals that in the best case, only 50% of the cuts could happen through retirements.  The rest of the cuts in the public service would come through layoffs.  The lack of any early retirement packages makes those layoffs unavoidable.  Some departments like DFAIT and the Department of Justice would be particularly hard hit with layoffs making up 82% and 72% of the cuts goal respectively

The situation would be much worse in Ottawa with between 16,000 to 34,000 full time positions lost in the public service.  These projections exclude any additional losses that might occur in crown corporations where geographic breakdowns are not available.

Mine is no longer the only voice on this topic.  My new figures have been independently validated by a study coming from government economists with direct access to internal figures.  The Canadian Association of Professional Employees calculated a loss of 110,000 full time positions in line with my figures (although no doubt with much better data sources).

Given the weakened economic environment, pushing unemployment over 8.0% is exactly the wrong move to make.  The initial Strategic Review cuts worth only $2 billion have already had a significant impact in service delivery for benefits like EI.  Another $10 billion in cuts will quintuple the impact.

The irresponsible drive to create a surplus through service cuts and higher unemployment is no doubt being driven by the need for fiscal room in time for 2014 election promises.  The subjugation of pressing economic circumstances to short term political goals is a very dangerous calculus which could well spiral out of the federal government’s control—to the detriment of all Canadians.


  1. I project a crash in employment much beyond 100K, I predict on our current pathway we will see a loss of 500K jobs minimum.

    My huge fear is the following causal chain.

    We have been relying on our resource extraction economy to help us make it through this downturn.

    – however, the dollar suffers because of the dutch disease and commodity speculation

    – manufacturing and forestry heartland of Ontario and Quebec gets beaten by the downturn and we lose over 600K jobs in manufacturing and over 200K in forestry since 2005 accelerating substantively in 2007.

    – housing boom and construction jobs (still at all time highs), resource extraction in the private sector and a strong public sector keep the winds in our economic sail. Domestic demand is propped up by consumer debt which is now most likely at its peak and against the wall.

    – however, it is a very delicate balance and the losses in manufacturing are not sustainable unless we get some longer term solutions, but none arrive because of govt policy.

    – austerity starts setting in at three levels,- take Ontario, Rob Ford in TO will cut, the Drummond report in Ontario will cut and now Harper’s upcoming budget will cut, and all of the cuts seem to be heavily focused on public sector employment.

    – this creates a strong negative push into the labour market and all the delicate balance between taxation and private public sectors sets about a self fulfilling goal of ratcheting down domestic demand.

    – this creates new pressures on consumer debt, but because we are up against the debt wall, we start having pressure on the housing bubble. We either slowly deflate the bubble or it bursts. The point is, though, it will deflate without more consumers buying inflated housing.

    – this creates two effects, first, consumption declines because of falling housing prices, even CMHC mortgages will decline. Secondly, this hits the construction sector, which as stated is the great, albeit short run equalizer for the declining manufacturing sector. More high paying jobs are trashed in construction.

    – So now everybody losing a job basically finds employment in the increasingly precariousness of work which accelerates. Backed up by some very poor stripped down social safety nets and we are all soon working at Wal-MArt.

    – so my 500K minimum jobs lost do not include precarious work effects.

    so in the end my jobs lost would include

    – 100k or more from public service cuts across the country
    – 250k in construction as the housing bubble slows
    – 100k in manufacturing as the high dollar continues to take its toll.

    Call me a pessimist, I can take it.

    By the way did anybody notice Philip Cross quit statcan, and did you take note of his remarks regarding how well the replacement voluntary survey went!

    The key words in his departure- the new voluntary replacement census had a response rate of 69%. But as he stated as bad as that is, that does not include item non-response, meaning a survey could come back with just a name filled in and you were declared a response. Which means a whole lot of blank questionnaires and cells. Mass imputation has its uses and abuses!?

  2. You have left out a few things. Check for analogies with Australia. The high dollar has gutted tourism there. An Australian Financial Review article pegged lost revenues at Quantas at 10% due to the high Australian dollar with consequent offshoring of jobs. Even domestic beer and wine consumption is down while imports are up. Oh, and the government has just made a $100 million bailout offer to GM to keep making cars there. Ford and Toyota are expected to follow.

  3. The only reason our unemployment rate is below that of recent history is simple; minority governments between 2004-2011 that “pampered” the people beecause they feared losing power… We had the depression of the 1990s, the Great Canadian Slump, done in the name of “hard choices” and right wing desires and now we’re back to this type of thinking. Keep the unemployment high because the bosses want it that way to keep wages down and profits up.

  4. I should have my photo in the national newspaper. I left nb 6 years ago due to unemploy ment there and moved to alberta. I worked 3 jobs in alberta (and did not even send a resume to get the jobs). I left due to housing problems and moved to ottawa in 2007. I worked for 1 year in 2008 in my field (healthcare). Since then I only found 2 temp jobs after sending 2000 resumes. I do not speak french but I have an education. I ended up on social assiatance for the first time in my life and living in rooms for the first time in my life in ottawa (unlike the outsiders who are handed everything). I am now voluteering at two locations in the hopes of finding work. I am in my 40s but very attractive. People are shocked that I am living this wa y in the land of my birth. I also have 6 friends who have worked all their lives and are out of work or onl y can find temp jobs at low wages. They cant make ends meet either. They want to leave canada they are fedup we cant afford to live in canada now with the rents very high and cost of livning and wages are too low plus massive immigration to create competition.

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