Job market very strong
Labour market statistics can tell us plenty about what’s going on in the economy, as well as give some hints about where things may go in the future.
Statistics Canada releases its Labour Force Survey – which reports the number of people working, the unemployment rate, and a few other stats about the job market – once a month. The agency also has a report about the number of workers employed by companies, which also contains information about the number of hours they worked and their weekly earnings.
But a third report put out monthly by Statistics Canada – on employment insurance beneficiaries – is another piece of the puzzle that helps paint a more complete picture of what’s going on in the labour market. The information for February 2012 was just released last week.
Nationwide, there were 73,740 Canadians collecting E.I. benefits (seasonally adjusted figure). That’s down 11.8 per cent from a year ago. Indeed, every province in the country reported fewer beneficiaries, but the biggest year-over-year drop was reported in Alberta, where the total number collecting benefits was only 27,880 – down by nearly 34 per cent from a year ago. On the surface, that’s great news. However, some caution must be used in interpreting the figure.
As an economic indicator, the E.I. report does has some strengths. Unlike the Labour Force Survey, the E.I. report is not an estimate – it is a solid figure produced from administrative data sources provided by Service Canada and Human Resources and Skills Development Canada. It is not subject to as many revisions, and it captures both urban and rural communities.
When the level of E.I. beneficiaries rises, it is clearly a sign of a slowing economy. Workers who are laid off must wait for two weeks before they can start collecting benefits but, other than this, rising beneficiaries is an immediate signal of a softening labour market. However, when the level of beneficiaries starts to fall, there are actually two possible reasons: 1) job seekers are finding work, which is good, or; 2) recipients have exhausted the number of weeks for which they’re eligible to collect benefits, which is not so good at all.
Using information from the other two major labour market reports from Statistics Canada, what can we conclude about Alberta’s dramatic drop in the level of E.I. recipients?
The accompanying graphs show how E.I. recipient levels rose sharply just as employment started to fall in Alberta after its pre-recession peak in October 2008 (the green shaded area on the graph). This is a normal and expected response in the labour market when Alberta’s economy slid into recession. Job losses are almost immediately followed by a jump in E.I. claims.
But between roughly mid-2009 to mid-2010 (the pink shaded area on the graph), the level of E.I. recipients dropped off very dramatically, while employment didn’t pick up at all. During this period, it was clear that the falling level of E.I. recipients was due to those who had exhausted their weeks of eligible benefits.
However, the picture brightens starting in late 2010. Employment started to pick up significantly, accompanied by another drop in the level of E.I. recipients (the orange shaded area on the graph).
While there were still many during this period who were exhausting their weeks of eligible benefits, more people were leaving the E.I. rolls because they were finding jobs. This has continued in recent months.
All in all, the news for Alberta’s job market continues to be positive. Alberta’s job creation in 2012 is likely to slow from the white-hot pace set in 2011; still, new jobs will continue to be created this year, which will boost incomes, reduce and unemployment rate, and move more Albertans off E.I. benefits.
Troy Media Alberta Business columnist is Senior Economist with ATB Financial.