I had a suspicion that the December unemployment numbers weren’t as rosy as everyone was saying and a new Fraser Institute report shows that is likely the case.
Last week, Statistics Canada trumpeted the fact that the national unemployment rate was as low as it has been since 1976. The trouble is, it doesn’t feel like the economy is booming.
We keep hearing stories of business closures, wobbly business confidence, empty downtown offices, pipelines that stubbornly refuse to get built, multi-billion dollar government deficits and record household debt. Yet the robust jobs numbers were referenced as a reason why the Bank of Canada would likely proceed with hiking interest rates, which will impact a lot of homeowners and indebted households.
Why is there such a mismatch between the statistics and what we see with our own eyes?
It turns out the unemployment statistics have not been particularly meaningful since the 2008 financial crisis. Back then, when unemployment numbers went down, there was a corresponding increase in the amount that employment numbers went up. Not so today. In fact, it is becoming increasingly common to see a decrease in both: fewer people looking for work, but also fewer people working.
The Fraser Institute’s Jason Clemens said Tuesday there is an obvious reason for this. It is due to the demographic shift of baby boomers leaving the workforce for retirement.
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So when we look at job statistics, we should be looking for different things than we have in the past. One thing we should be looking for is evidence the private sector is creating more jobs than the public sector. Without robust private sector jobs, there isn’t going to be the tax revenue to support more public sector jobs.
We also need to rethink the conventional wisdom that full-time jobs are more valuable an indicator than part-time jobs.
There are plenty of reasons why a worker would choose part-time work, depending on their interests, school, raising families and so on. But, if we see that many of those part-time jobs are being filled by those 65 and older – who are remaining in the workforce after the traditional retirement age – that is not a negative indicator. It’s a positive one.
Over the next couple of decades, the number of people working is going to continue to decline and it is going to have tremendous consequences. The simple reality is we have an expensive social welfare system that requires private sector workers to support it. Unfortunately, Clemens doesn’t see any evidence governments are preparing for the new reality. They need to start.