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Canadian Unemployment Rate Declines in May Mask Job Market Weakness

from Brittney Windatt

The month of May brought a 1.6 percent increase in total employment over the previous 12 months, causing unemployment to drop 0.2 percent to 7.4 percent.   But a closer look paints a less optimistic picture: The increase in employment for the month of May was driven largely by a decline in the number of people looking for work and by more people becoming self-employed.   Private sector jobs growth remains weak.

Industries receiving employment gains were retail and wholesale trade, which increased by 34,000 in May and offsetting declines in the previous two months.   As well, information, culture and recreation increased by 15,000 in May, resulting in a 5.5 percent increased in the past 12 months.

On the other hand, educational services experienced declines in employment, compared to the steady increases in the first four months of 2011.   Most of the declines in the educational services industry occurred in post-secondary institutions.   Also experiencing an employment drop is the manufacturing industry, with employment down by 23,000.

Although employment in manufacturing has been dropping over the past four months, the industry has seen a 1.4 percent increased since May 2010.   However, this came after a much more significant decline in 2009 and late 2008. Construction has experienced little change, although employment has increased by 3.3 percent over the past 12 months.   Public administration was up 1.8 percent over the past 12 months and employment gains from the 2011 Census activities in May were offset by slight declines in other sectors of the federal administration.

The number of self-employed workers has grown 1.8 percent over the past 12 months.   However, employment among public sector employees in declining and has fell by 44,000, likely as a result of government measures aims at dealing with the budget deficit.

Employment over the past 12 months has grown 1.7 percent for Ontario – slightly above the national average; however the province did see a decline of 16,000 for the month of May and unemployment remains the same at 7.9 percent.   Interesting to note is that all employment gains were in full-time work.

Full-time employment increased by 33,000 in May, meaning a 1.6 percent increase over the past twelve months, while part-time employment increased 1.5 percent.   Compared to May 2010, unemployment for students aged 20 to 24 for May 2011 is at 15 percent and lower than the 16.5 percent unemployment in May 2010.   Students aged 20 to 24 who were employed in May was 60.8 percent, which is higher than May 2010 and May 2009 when students were most affected by the labour market downturn.

Now the Bad News

Although it appears that unemployment is gradually declining, other factors play a role in causing this to happen.   Those who have been unemployed for awhile and cannot find suitable work become self-employed, thus allowing unemployment to appear to be decreasing.   However, statistics show that after roughly a year’s time, 80% of those who became self-employed will go out of business, resulting in unemployment to rise again.

As mentioned earlier, the retail industry has shown significant growth as 20.3 percent of all new job postings were accounted for in this industry.   Interestingly however, the manufacturing industry accounted for 14.8 percent of all job postings in York Region even though it was stated that employment in the manufacturing industry was declining.   Altogether, 3,300 new job postings were posted in May for York Region, Ontario (usually fairly good representative of the Greater Toronto Area) which is better than April but worse than any month of the first quarter of 2011.

The Statistics Canada labour   market survey summary can be found here:


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