Hidden Unemployment

Today’s Labour Force Survey indicates that employers paid 79,000 fewer Canadians in July. However, a surge of workers declaring self-employment or abandoning the workforce altogether left 9,000 fewer Canadians officially unemployed.

Self-Employment

Many Canadians are turning to self-employment due to a lack of jobs. Self-employment rose by 35,000 in July, reaching another all-time high. As a result, the net decrease in national employment was 45,000.

Employment Drop

Most of this decrease occurred in Quebec, where 37,000 fewer people were employed. Newfoundland and Saskatchewan suffered proportionally similar employment declines of 3,000 and 5,000 respectively.

All three provinces lost about 1% of their employed workforces in July. Proportionally smaller declines elsewhere were offset by a surprise increase of 14,000 in Ontario.

The employment decline in Saskatchewan is particularly notable because that province’s workforce had continued to grow despite the global recession. As Statistics Canada notes, total Saskatchewan employment has now been knocked back to where it was when the economic crisis began.

Unemployment and EI

Some 54,000 Canadians dropped out of the workforce entirely. As a result of self-employed and discouraged workers, the official unemployment rate remained unchanged.

The Employment Insurance (EI) program sets both the number of work hours needed to qualify for benefits, and the duration of those benefits, based on the official unemployment rate.  In theory, as the labour market worsens, longer EI benefits should automatically become more accessible to unemployed Canadians.

In July, although the labour market clearly deteriorated, there will be no consequent national improvement in EI benefits. (The official unemployment rate will have increased in certain EI regions, but decreased in others.)

The official unemployment rate’s limitations as a barometer of actual labour-market conditions should prompt policy intervention to enhance the accessibility and duration of EI benefits.

UPDATE (August 11): Quoted by the Regina Leader-Post and Saskatoon StarPhoenix