Healthy Labour Market? Be Patient!

Unemployment Rate in 2004
Unemployment Rate in 2004 -
low before elections in June

At the beginning of this month, Statistics Canada announced an unexpected unemployment decline. Economists’ comments were optimistic, claiming that the growth indicates that the Canadian recovery is moving forward.

They had been expecting the Bank of Canada to begin hiking interest rates in the second half of the year, but Douglas Porter, deputy chief economist for BMO Capital Markets, said: “The details [of the decline] were not quite as impressive, and jobs may have got at least a small temporary boost from the election.” Maybe the optimism toward the labour market was too hasty given that employment is strongly influenced by elections. Let’s take a look at employment changes during previous elections.

Unemployment Rate in 2006
Unemployment Rate 2005 - 2006:
fluctuations until elections in
January, then a slight decrease

Elections in 2004

The unemployment rate was falling slightly three months before the elections on June 28, 2004. In June, the unemployment rate grew by 0.1%, and the average weekly earnings of payroll employees were 2.3% higher than in June 2003. “Accommodation and food services and other services led all industries with the strongest growth in the past 12 months, while arts, entertainment and recreation, and transport and warehousing registered small declines,” stated Statistics Canada.

Elections in 2006

The 39th federal elections were set on January 23, 2006. Unemployment grew by 0.04% but was falling during the next four months. These results might be skewed due to Christmas happening one month before the elections. Employment usually grows in December, with exceptions in crisis years 2008 and 2006. Moreover, Canada’s 2006 unemployment rate was at its lowest in 30 years, and its small growth was insignificant.

Elections in 2008

Unemployment Rate 2008 2009
Unemployment Rate 2008 - 2009:
growth from July 2008 to July 2009,
except election-setting October 2008

On October 14, 2008, the next federal election occurred in Canada. The crisis caused unemployment to steadily grow from July 2008 to August 2009, with only one exception in October 2008. The total number of unemployed persons decreased by 0.06%. The next decline, by 0.41%, was recorded 11 months later.

Elections in 2011

Economists had expected a modest growth of 20,000 jobs in April, following small gains in March and February. But 58,000 jobs (more than twice what was expected) were a surprise. The unemployment rate decreased from 7.68% to 7.61%. It is interesting that, compared to last year, employment among women aged 55 and over increased by 102,000, or 7.9% — the fastest growth rate of all demographic groups.

Unemployment Rate 2010 2011
Unemployment Rate 2010 - 2011:
in April, a month before the
election, unemployment falls

Be patient

Elections bring new jobs to the labour market. Since July 2010, the unemployment rate has been decreasing, and the election in May supported this trend. We should be patient, however, and not consider April’s decline as evidence of a recovered market. Only the coming months will show the true state of the labour market recovery.

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