A fast way to lower jobless rate: Use U.S. metrics
Miles Corak, Globe and Mail Blog Friday, May. 04, 2012
Where to begin. Mr. Corak’s post is ill-informed/timed/advised, and simply irresponsible given the context in which it was written. A less-informed reader would be left with the impression that the Canadian unemployment rate is being overstated. Given Mr. Corak’s statement that his blog (intentionally unlinked here) “is intended for an audience of engaged citizens who have a curiosity (but not neccesarily an in-depth knowledge) about economics and how it can inform public policy”, one cannot help but assume that was the intent.
Aside from the fact that the LFS numbers are a crapshoot from month to month for numerous reasons (seasonal adjustment, questionnaire/self-reporting issues, quasi-cohort effect, etc.), a post like this misses the point of an unemployment rate: to measure underutilisation in the labour market in particular and the economy in general. Every person not working who is available to should be counted. Defining the unemployed as only those who respond a certain way to a question regarding the scope of their job search effort is absurd. Discouraged workers start to look for work when they sense they can secure employment, their resumed search triggered by new-found confidence in the overall economic outlook. That is why there is usually a lengthy lag between general (real) economic recovery and a decline in the unemployment rate: the labour force number (the denominator) begins to swell as previously discouraged workers rejoin the labour force.
That is not the situation in the Canadian economy, where the gap betweeen the official unemployment rate (R4) and the rate that includes discouraged workers (R8) is practically unchanged from the worst of the recession in mid-2009. Yet the rate that includes discourages workers is never reported by Statcan in its Daily, nor by the media, which largely relies on the Statcan Daily releases for economic news.
Simply changing metrics to make things look better is a disturbing recent trend in Canada. A few economists’ blogs have written about the federal government tinkering with the CPI, but it has largely been un(der)reported in the media. Troubling are what appear to be the more recent low-income measures, which appear to serve no purpose other than undercounting the poor.
To further muddy the waters, the federal government defunded and effectively eliminated the National Council of Welfare in the recently tabled 2012 budget, a source for data on poverty used by this site and countless others. The same budget also eliminated the First Nations Statistical Institute and National Round Table on the Environment and the Economy. The National Council of Visible Minorities was eliminated a couple year ago. Add to these the long list of social, economic and environmental survey programs eliminated over the last five years and the intent seems obvious.
Canadians are entering the disinformation age. In this new age, Mr. Corak’s post suggesting “a fast way to lower jobless rate” makes sense, at least as much sense as taxing food staples because “more affluent Canadians are actually deriving a greater benefit than the poor”.