Why unemployment is 50% higher than you think: 12.8%

Unemployment in Canada’s private sector hit 12.8% in December 2009, yet the publicly announced unemployment rate sits at 8.5%. How can this be ? 

Simple… it depends on how you do the math. Stats Canada works on the presumption that the unemployed (and we are not disputing that number: 1,5678,000 last month. In fact we aren’t questioning any of the numbers published, but the way they get arranged to get to the unemployment rate.  StatsCan does the math like this:

Unemployment / Total Labour force = Unemployment rate

which seems reasonable enough, if you don’t look any deeper.  The question that takes you inside the mystery is: What is this labour force made up of and are they subject to being unemployed? Let’s take a look.

  2009 December (thousands)
Public Sector Employment 3,439.6
Private Sector Employment 10,693.5
Self Employed 2,738.2
Unemployed 1,567.8
Total Labour Force 18,439.1

These figures taken directly from the StatsCan website do give us something to work with. Firstly there is no unemployment in the self-empoloyed category so they should not be included. Second there is no unemployment in the public sector either, since over 75% is unionized (compared with only 13% in private sector) and the government doesn’t scale back employment due to economic setbacks (au contraire: in fact government employment is up 17,700 over December 2009).  So let’s see what the real labour force at risk of unemployment is:

  2009 December (thousands)
Private Sector Employment 10,693.5
Unemployed 1,567.8
Labour Force 12,261.3

You can easily see that the denominator for unemploment rate has dropped by 1/3. This transalates into the rate of unemployment going up by a half.  The real unemployment rate among those who are at risk of unemployment is 12.8% in Canada and has been unchanged for a year.

This high rate looks realy scary…until you look at the USA. Their rate of unemployment, reportedly at 10% is well over 15% in the private sector. Anyone expecting a recovery in the short term had better take this into account.

David McNab

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One thought on “Why unemployment is 50% higher than you think: 12.8%”

  1. Unemployment in the US and Canada is high partly due to the economy and partly due to technology. In short, we have replaced many jobs of years ago with machines. Buy a ticket at the movie- go to a machine. Pay for a parking spot- a machine, the list is endless and technology has helped us do more with less workers.

    Of course, technology has also expanded jobs, however, make no mistake- we have also outsourced a lot of out of country.
    Liked your logic.

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