Source(s): Jobs Report – The State of the Canadian Labour Market (PDF), Budget 2014, Department of Finance.
This story was mentioned in passing a couple weeks back, but it’s worth expanding on a bit. As noted, the preceding chart is from Budget 2014, tabled two weeks ago by current Finance Minister James Flaherty. Immediately following the referenced chart, p.30 of the companion ‘Jobs Report’ notes
Canada’s unemployment rate in January 2014 was 7.0 per cent, about 1 percentage point above its pre-recession level, whereas the job vacancy rate reached 4.2 per cent in January 2014, a level similar to its pre-recession level, when the unemployment rate was just above 6 per cent.
The 4.2% rate reported by Finance is remarkable, considering the following week StatsCan Job Vacancy Statistics (JVS) release pegged the job vacancy rate at 1.5%. While StatsCan’s figure was practically unchanged from a year earlier, Finance’s reported rate soared. Using the January 2014 LFS figure for total employees – seasonally adjusted, that’s an extra 432,000 vacant jobs reported by Finance (1.5% vacancy = 230,000 jobs, 4.2% vacancy = 662,000 jobs). How and why did this happen?
To get to the bottom of it, one first needs to figure out who was responsible for the questionable data reported by Finance.
Despite being cited as a source in the referenced chart, Finance’s job vacancy stat didn’t originate from the Canadian Federation of Independent Business (CFIB). For its part, the CFIB conducts its own job vacancy survey, sampling its membership. It defines job vacancies much more loosely than StatsCan
CFIB’s definition… does not require that a specific position exists, only a need.
Even with its biased sample and phantom job vacancies, the latest CFIB Help Wanted – Private sector job vacancies in Canada: Q3 2013 could only muster a job vacancy rate of 2.4%.
Nor was it WANTED Analytics, also cited as a source by Finance. For its part, the company publishes data and analysis of job postings from various web sites. When reached for comment, the company justifiably distanced itself from any questionable research or conclusions by clients using its data. As a representative of WANTED Analytics indicated
Anyone that publishes our data can use their own methodologies in order to calculate any type of unemployment rates, we simply provide insight into what the employers are placing online… Our customers infer what they would like.
So that leaves StatsCan, the remaining source cited by Finance. As mentioned, the job vacancy stat provided by Finance is nearly three times that provided by StatsCan. While StatsCan has refused to indicate whether its senior management had been approached by the Ministry of Finance, representatives from its Labour Statistics Division and from Finance have suggested there was no consultation prior to Finance’s decision to disregards StatsCan’s JVS.
So Finance came up with the reported job vacancy stats all on its own, without any consultation.
How did Finance come up with a job vacancy stat higher than those of StatsCan and the CFIB, combined? The official response
The Job Vacancy Rate is defined as the number of online job postings (from Wanted Analytics) divided by the sum of employment (from Statistics Canada) and the number of online job postings (from Wanted Analytics)…
Problem? The number of online job listings ≠ number of job vacancies, especially in the internet age. Broadly, there are two major issues with using job listings, especially online postings, as a proxy for job vacancies: duplicates and phantom listings.
It’s worth noting that StatsCan once reported an index based on job listings, though it never refered to them as ‘job vacancies’. StatsCan’s Help Wanted Index Survey (HWI) was discontinued in 2003. Reason
The Help-wanted Index was long viewed by users as a proxy measure for unmet labour demand and an indicator of the near-term direction of the labour market. However, many users have expressed concern over its performance in recent years, especially in light of the growing use of the Internet by employers as a means of posting job openings.
It’s difficult to imagine Finance being unaware of both the fact StatsCan had discontinued a similar survey, and the reason it did so; that would be a stunning display of incompetence. So why was it so brazen as to use an obviously questionable measure as its ‘Job Vacancy Rate’?
The only reasonable explanation is politics. A 7.0% unemployment rate and corresponding 4.2% job vacancy rate speaks to a roaring economy held back by a ‘skills shortage’. A 14.2% labour underutilisation rate and corresponding 1.5% job vacancy rate speaks to a stalling economy with a major ‘jobs shortage’. The government would obviously prefer the former narrative, given its years of ‘Jobs – Growth – Prosperity’ sloganeering.
-Finance also used this ‘methodology’ to over-report job vacancies in Budget 2013; see Jobs, Growth and Long-term Prosperity – Economic Action Plan 2013 (PDF), p.39. Human Resources and Skills Development Canada (HRSDC) referenced WANTED Analytics earlier, in 2012; see Aboriginal Skills and Employment Training Strategy – Labour Market Bulletin, Fall 2012 (PDF).
-A relative comparision with the US shows that, despite its more restrictive Job Openings definition, the Bureau of Labour Statistics (BLS) Job Openings and Labor Turnover Survey (JOLTS) shows the US job vacancy rate is 2.8%, nearly double the rate reported by StatsCan; This may have been a factor in Finance’s questionable decision.