“Real” unemployment in Canadian cities - 2006

A major source of inaccuracy in the official unemployment figure is discussed here. The discussion is technical and cogent. There are several policy implications of the fact the unemployment in Canada, and the West in general, is much higher than officially acknowledged.

The labour force survey is done monthly at great expense to Statistics Canada. One problem is the labour force itself varies as a percent of the population. It varies from region to region and in the same place it varies with the business cycle. The missing element is hidden unemployment which is not caught in the labour force telephone survey. This is always a problem and the world over statisticians never just report the labour force figures alone rather they report the labour force itself  as a percent of the adult population, that is they report the “adult participation rate”.

The question arises what is the natural rate of adult participation given that there is almost always some unemployment and some hidden unemployed. A good answer is: What is the adult participation rate in the few cities that approach full employment? In Canada it’s Alberta in general and Calgary and Edmonton specifically. It’s unlikely that there’s regional variation as people have to work. In these cities as the economy improved the labour force went above what is normally considered full employment. This phenomenon in best cities is repeated in the USA, UK, Australia and New Zealand. These lead cities post similar rates, 72% - corrected for demography. It’s a startling and important statistic.

Below is the 2006 unemployment rate in Canadian cities corrected to high participation, Calgary’s 2008 figure, adjusted for people over 64. The data is from the census, not the labour force survey.

Note that regardless of the real unemployment rate the official unemployment figure maxes out at around 7% - 8%. The worst example is Saguenay in Quebec where the official unemployment is 8.8% but reality is 23.1%. In Saguenay some 14.3% of the potential labour force has dropped out, is a swing work force and shock absorber for a bad economy. That’s one in six workers had the means of support and inclination to drop out of the labour force as the economy made it hard to find work. These people do other things, look after the kids, go back to school or simply retire early. Economists tend to think these people are not unemployed, although they do need the money. 

The labour force survey attempts to capture this gray area of marginally attached to the labour force persons. They ask “would you like to be working” of people who are unemployed and not looking for a job. This is called “discouraged workers”. The statistic is always a fraction of one percent only and is not reported generally as a result. The problem is because people do not relate to the question when there are no jobs around, or when the horizon for a good economy is years away. The labour force telephone survey is not reliable and should not be used to guide national economic policy.

…………………………..Official………………Estimated Real

…………………………Unemployment………Unemployment

…………………………….2006…………………….2006 

Montreal……......................6.9%................................14.9%

Toronto……........................6.7%................................14.5%

Vancouver….......................5.6%................................14.3%

Ottawa-Gatineau..................5.7%................................11.8%

Oshawa……........................6.4%................................13.3%

Hamilton……......................6.0%................................12.8%

St. Catherines.......................6.2%................................12.5%

London…………………….6.1%................................12.7%

Windsor……........................8.3%................................19.6%

Kitchener……......................5.6%................................9.8%

Sudbury……………………..7.8%..............................19.1%

Thunder Bay………………..7.4%................................16.2%  

Winnipeg……......................5.0%................................10.2%

Regina……….......................4.8%................................7.5%

Saskatoon……......................5.2%................................9.6%

Calgary………......................4.0%................................5.8%

Edmonton……......................4.6%................................7.6%

Victoria……………………..4.3%................................8.1%  

St. John’s.…………………..10.0%................................21.5% 

Halifax……………………..6.3%................................13.2%  

St. John……………………..8.0%................................18.2%  

Saguenay……………………8.8%................................23.1%  

Quebec……………………..4.6%................................10.7%  

Trois-Rivieres………………7.3%................................19.5%  

Sherbrooke………………….6.9%................................16.3%