Rachelle Younglai informs readers that the Canadian labour market lost 31,200 jobs in July and the Canadian unemployment rate went up to 6.9% from 6.8% in June. In contrast, the U.S. economy gained 255,000 jobs in July, leaving the U.S. unemployment rate unchanged at 4.9%.
Appropriate Subject Area(s):
Key Questions to explore:
- What does labour participation rate mean? (See the Introduction section below for definition)
- Why is the Canadian economy struggling?
Canada’s real gross domestic product (GDP) declined by an annualized 1.6 per cent from April to June. There was a 16.7% annualized drop in Canadian exports in the second quarter. This occurred mainly due to low oil prices and the wildfires in Alberta, which led to a decline in oil output, export and investments. In addition to this, there were also significant reductions in the export of vehicles and vehicle parts (6% decline) and consumer goods (7% decline). The combination of these factors has led to a sluggish Canadian economy.
What are the root causes of the job losses in the Canadian labor market? How can this be fixed?
Some causes and definitions:
- Cyclical Unemployment: This term refers to the change in job availability due to upswings and downswings in the business cycle. We are currently seeing this form of unemployment in Canada’s oil sector. The reduction in oil prices and the Alberta wildfires have led to a reduction in output and investment in the oil sector. Consequently, we have seen an increase in unemployment in the oil sector.
- Structural Unemployment: This is a form of unemployment caused by a mismatch between the requirements of employers and the skills possessed by unemployed workers. The Canadian labor market has been affected by structural forces like globalization, technological advancement and the aging population. Globalization and technological change is reducing the demand for middle and low skilled workers. Canadian employers demand workers with degrees in science, technology, engineering and math; however, the current supply of these workers is low, relative to demand. This mismatch is another component of the high unemployment that exists in the Canadian labor market.
How can this be fixed?
A report published by the C.D. Howe Institute offers some recommendations which include the following:
- Better support for displaced workers, by reforming the current eligibility criteria for Employment Insurance.
- Provision of more detailed and accessible labour data which could help with matching of domestic employers with domestic workers.
- Better skills development programs to boost productivity, raise employment and fuel stronger income growth for workers.
- Removing barriers which prevent youth, immigrants and aboriginals from entering the workforce. This could be achieved by improving literacy of aboriginals; investing more in language training for refugees; valuing the education and skills of new immigrants.
- Improve labour mobility by harmonizing varying provincial licensing, certification and occupational qualification.
Unemployment rate, labour participation rate, recession, public sector jobs, private sector jobs, census
- Globe and Mail Article
- Official employment statistics from: http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/lfss01a-eng.htm
Introduction to lesson and task:
In July, the Canadian economy lost 31,200 jobs, signalling another blow to Canada’s already bruised economy, which has been severely hit by the Fort McMurray wildfires and low energy prices. These job losses led to an increase in Canada’s unemployment rate, which measures the percentage of people who are actively seeking work but are unable to find jobs.
More troubling is the fact that discouraged workers are leaving the labour force. This means that they are either no longer searching for jobs or they have stopped working altogether. This phenomenon has led to a decrease in the labour participation rate – i.e. the number of people who are either employed or looking for work – from 65.5% in June to 65.4% in July. Equally troubling is the fact that wage growth has slowed. This suggests that demand for labour in Canada has declined.
In contrast to Canada’s declining job growth, the US created 255,000 jobs in July, with a labour participation rate of 62.8% in July, up from a 62.7% participation rate in June.
Students can benefit from exploring the difference between unemployment rate and labour participation rate, and what both statistics indicate about the state of the Canadian labor market.
Action (lesson plan and task):
- Give students copies of the article to read, and tell them that his lesson plan will focus on the qualitative and quantitative aspects of the article.
- Ask students to open the Statistic Canada page listed above using the link provided.
- Ask them what the unemployment rate means.
- Ask what the formula for calculating the unemployment rate is. (They are unlikely to know, but explain that it is the number of unemployed divided by the total labour force)
- Have students calculate the unemployment rate for June and July, using figures in the table.
- Ask them what the labour participation rate means.
- See if they know what the formula for calculating the labour participation rate is. (Again, they won’t know but tell them it is the labour force, which includes both employed and unemployed people, divided by the adult or working age population)
- Ask students to calculate the labour participation rate for June and July.
- Ask them if they notice any trends in the numbers. (hint: the labour participation rate has slightly decreased, while the unemployment rate has increased.)
- Find out if they know what these trends mean.
- Ask students if they can say why the Canadian economy is struggling. (See Key Questions, above, for the answer)
- Discuss the root causes of the job losses the Canadian labour market has suffered. Ask students to suggest what measures the Canadian government can take to combat job losses. (Again, see Key Questions)
- Discuss some potential effects these job losses could have on the Canadian economy.
- Cost to Individual: There are significant costs of unemployment to individuals. These include the reduction in the standard of living of the individual. Prolonged unemployment can lead to an erosion of the skills of these individuals, robbing the economy of talents. It can also lead to high levels of stress, which can spiral into mental or physical health problems, which shorten lifespans.
- Cost to Society: High levels of unemployment often correlate with less volunteerism and higher levels of crime.
- Cost to Canadian Government: High levels of unemployment will mean that the Canadian government must pay more in unemployment benefits and receive less in tax revenues. The increase in expenses and reduction in revenues might cause governments to borrow more and cut back on spending in key areas like education and infrastructural development.
Consolidation of Learning:
- Explain to students that neither the labour participation rate nor the unemployment statistics give the full picture. To understand whether the labour market is positive or negative, one must analyze both statistics.
- Students should be able to define the labour participation rate, the unemployment rate and the employment rate.
- Students should able to explain why the Canadian economy is currently performing poorly, and the effect this is having on Canadian citizens (i.e. job losses, low wage growth, etc.)