Still In Recession

Economic growth may have resumed, but the unemployment rate won't be falling anytime soon.

While the situation is not quite as daunting as in the U.S., Canada’s job market is still mired in deep recession. Chances are that it will take a long time to climb out of the hole into which we have fallen, unless governments give job creation the priority it deserves in the upcoming round of budgets.

Economic growth has resumed, but the consensus of private sector economists recently canvassed by the Department of Finance is that the national unemployment rate will average 8.5 per cent this year, and fall only slowly next year.

Our economy has to grow at an annual rate of at least 2 per cent to put a dent in unemployment. This is because the labour force is growing by 1 per cent per year as echo baby boomers still enter the job market in large numbers, and because labour productivity – output per hour of work – usually rises by at least 1 per cent per year.

If we are to stop the unemployment rate from rising, the economy has to generate about 350,000 jobs per year. On top of that, if we want to return to the unemployment rate we had before the Great Recession began in October 2008, we have to create about 500,000 new jobs – and that would still leave over 1 million Canadians out of work.

In January, the economy added 43,000 new jobs, but they were all part time. The national unemployment rate stood at 8.3 per cent, a bit down from the recession high, but the “real” unemployment rate is much higher.

A Statistics Canada measure adds to the number of unemployed those people who have dropped out of the labour force because no jobs are available, and the lost hours of people who want to work full-time but can find only part-time jobs. The unemployment rate by this measure is still over 12 per cent, or one in eight workers.

A significant proportion of the lay-offs that occurred during the recession and even before, especially in manufacturing and forestry, are permanent. We face a severe social and poverty crisis as tens of thousands of workers who are unemployed through no fault of their own exhaust their Employment Insurance benefits, and find that few if any jobs are available in hard-hit communities across the country.

Our EI program leaves far too many of these unemployed Canadians, especially women and lower wage, insecure workers, out in the cold. Only half of all unemployed workers qualify for benefits, and the average weekly benefit for those who do qualify is just $343. The more than 800,000 unemployed workers now on EI qualify for an average of just 38 weeks of benefits, and tens of thousands of workers who lost their jobs in the early stages of the crisis have already exhausted their claims.

EI benefits have been temporarily extended for five weeks for all workers, and up to 20 weeks for a few older workers. But this is not enough in a jobless recovery. Provincial social assistance caseloads are starting to rise rapidly.

As experienced and skilled workers are forced to turn to insecure, part-time and lower paid jobs in order to survive, more and more of the burden of unemployment will fall upon young people and recent immigrants. We now run the risk of creating a lost generation of highly educated workers, workers we will need in a few years when the baby boomers start to retire in large numbers.

There is also a huge risk that wages will start to fall significantly as desperate workers compete for an insufficient number of jobs. Wages for part-timers have already started to fall when adjusted for inflation.

There will be no quick or easy return to the job market we had before the Great Recession. The U.S. economy is very weak and our dollar is far too high, meaning there will be only a very slow recovery of exports and business investment. The housing boom, which has maintained jobs over the last few months, will soon run out of steam, leaving working households to deal with very high levels of debt. There can be no lasting recovery of consumer spending until we get a recovery in the job market.

The priority for governments, then, must now be jobs and support for the unemployed, not deficit reduction. Our national debt is low, just half of what it was in the mid 1990s. Interest rates are and will remain low.

Governments must deal with the human impacts of the jobs crisis, and set the stage for shared progress in the next economy. Now is the time for a public investment-led growth to support job creation today and a stronger private sector recovery tomorrow. Now is the time for investment in good public infrastructure and good public services as key job-creators and key drivers of private sector productivity in the future. Now is the time to help rather than turn our backs on the unemployed.