The Job Market Recovery that Never Really Happened

Canada’s economy has been weathering the “great recession” better than most other developed economies, we were told, and the proof was supposedly in the job numbers. Unemployment is still quite high, but until Friday, Statistics Canada was at least reporting that Canada’s economy had already regained all jobs lost in the recession.

But on Friday, January 28th, the story changed. Statistics Canada issued a revision to employment numbers that it had reported previously. It turned out that, after all, the jobs lost in the recession have not been recovered quite yet.

Based on the revised estimates, employment is still lower by 30,000 (0.2%) compared to the 2008 peak: From the employment peak of October 2008 to the low in July 2009, 428,000 jobs were lost (a decline of 2.5%). From the period beginning in July 2009 to December 2010, the revised estimates indicate an employment increase of 398,000 (+2.4%).

The reason for the revision sounds almost too simple. Statistics Canada uses a combination of past census data and actual new data to estimate data that it cannot measure directly. The census data that Statistics Canada used in its calculations until now were from the 2001 census – and not from the 2006 census. So estimates of Canada’s population – and with it the size of Canada’s labour force – were not quite accurate and have now been revised down by 0.3%.

It is not quite clear why Statistics Canada is only switching to using the 2006 census data now, given that it has been available for over 4 years. (In fact, another census is scheduled to take place later this year).

The revisions that Statistics Canada made include updates to current occupation and industry classifications; an update of seasonal adjustment as well as an update of geographic boundaries.

While using the new population estimates, levels of employment and unemployment were revised downward.   Overall employment for December 2010 was revised down 0.6%, mostly due to the downward revision of the population group aged 25 to 54. However, the unemployment rate remained the same for December 2010.

The December 2010 levels of employment were also adjusted for the provinces. They were revised downward 1% or more for New Brunswick (-2.4%); British Columbia (-1.9%); Newfoundland and Labrador (-1.8%); and P.E.I. (-1.1%). Alberta was the only province with an upward revision of (+0.8%).

In retrospect, however, the claim that all jobs lost in the recession had been regained always sounded somewhat shallow, for several reasons:

  1. The “regained” jobs are very different from those that were lost.
  2. Unemployment does remain much higher than it was before the recession because Canada’s population – and its labour force – have grown since.
  3. If a simple change in methodology can turn a “positive” variance between pre-recession and current job numbers into a negative one, then the “positive” variance was likely always within the old data set’s margin of error. I don’t remember seeing a clear message explaining this from Statistics Canada.

The full release from Statistics Canada can be found at the following link:
http://www.statcan.gc.ca/daily-quotidien/110128/dq110128b-eng.htm