Posted at 7:00 a.m.
I have always wondered if it was relevant to compare the unemployment rates of Canada and the United States, and on what basis this comparison was made. Are these unemployment rates calculated in the same way on each side of the border? What exactly do these percentages mean? Politically and economically, would the United States sometimes have an interest in underestimating its unemployment rate?
Michele Ruel, Sainte-Agathe-des-Monts
In order to adequately answer this question, The Press called on Francis Généreux, who is a senior economist at Desjardins Group. He is one of the co-authors of the analysis bulletins on monthly data on employment in Quebec, Canada and the United States.
“The question of comparing unemployment rates in Canada and the United States is very interesting in the current context of the still difficult exit from the pandemic in these two neighboring and very interrelated economies”, Francis Généreux immediately admits during a discussion with The Press.
Especially since the most recent measurements of the unemployment rate in the two countries in December – down to 4% in the United States and still at 5.9% in Canada – may give the impression that the job market is would do better with our American neighbors than that of Canada.
“It’s a misleading impression if you look at the unemployment rate alone, without considering other important measures of the job market, such as the ‘participation rate’ of job-ready people. labor as well as job creation in each economy, emphasizes Francis Généreux.
“In fact, when you look at these two measures, you see that Canada’s labor force participation rate and job creation are showing a much better performance in recovering from the economic shock of the pandemic than what has happened so far. See you now in the United States. »
How can such a gap in perception of the state of the labor market between the two economies be explained?
To answer this question, it is necessary to better understand these main measures of the labor market. Starting with the unemployment rate.
Essentially, this measure represents the percentage of people who are looking for work among the entire “active population”, that is, all people (aged 15 and over in Canada, 16 and over in the United States) who are fit and available for work.
The unemployment rate is measured in a similar way in Canada and the United States, i.e. by a monthly telephone survey of a sample of some sixty thousand households considered representative of the entire working population.
In Canada, this monthly survey is conducted by Statistics Canada, an agency of the federal government. In the United States, it is conducted by the Bureau of Labor Statistics at the federal government’s Department of Labor.
Return to work and job creation
Other important labor market measures are the “participation rate” of employable people and “net job creation” among private and public sector employers.
“These measures are all the more important these days because their very different evolution between Canada and the United States explains in large part the delay of the American economy in recovering the jobs lost at the worst of the pandemic compared to to what happened in Canada,” said economist Francis Généreux.
“For example, when we look at labor market participation rates, which had fallen significantly in both countries at the start of the pandemic, we see that in Canada, it has risen to its level of 65% which observed before the pandemic. But in the United States, this participation rate is stagnating around 61%, which is almost two percentage points lower than the pre-pandemic level, indicates Mr. Généreux.
This means that a very high number of Americans continue to delay a possible return to work after the pandemic. They also reduce the number of “active job seekers” which is measured by the unemployment rate, which is thus abnormally low.
Francis Généreux, Senior Economist at Desjardins Group
This observation is also repeated when we compare the level of recovery in job creation between Canada and the United States.
“According to the most recent data [de décembre 2021], the labor market in Canada has not only recovered all the jobs lost at the worst of the pandemic, but it has 240,500 more than in February 2020, before the start of the pandemic, underlines Francis Généreux.
“Meanwhile, in the United States, contrary to what the very low unemployment rate may suggest, the job market remains in deficit by 3.5 million occupied jobs compared to the number measured in February. 2020, just before the pandemic. »
As for the political impact of such a situation? According to economist Francis Généreux, the persistence of such a job deficit in the United States may have motivated the inclusion of several back-to-work incentives in the huge stimulus package. post-pandemic economic plan that was recently presented to the US Congress by President Biden’s administration.
On the other hand, these incentive measures are highly criticized by the Republican opposition in Congress, which considers them exaggerated and too costly in the context of an unemployment rate lowered to 4%, and a rebound in wage inflation in the key sectors of the economy most affected by the scarcity of skilled labour.
“This is an example of the risk of political interference in the interpretation and use of labor market data,” concludes economist Francis Généreux.
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