These are the slides I prepared for this conference a few weeks ago in Ottawa, in which I tried to get a handle on the gross flows in and out of employment during the recession, and how it compared to the US experience. It's actually the extended version of those slides; I ended up hacking out almost half of them at the last minute.
The story of the Canadian labour market in the second half of 2011 was a recovery knocked off course by events in international financial markets. The crises associated with the US debt ceiling and European sovereign debt drove down commodity prices and the Canadian dollar.
So the fact that employment growth slowed in the wake of the uncertainty in financial markets seems unsurprising. Moreover, it seems plausible that one of the hardest-hit sectors would be those who worked in financial markets: the FIRE sector (finance, insurance and real estate).
But it's not at all clear to me that this is in fact what's going on.
It's been five or six weeks since I noted that there was something strange about the Quebec LFS employment numbers. A one per cent drop in employment in the space of two months looked like the ohmygodweareallgonnadie months of early 2009, but there didn't seem to be any supporting story for why it was happening in Quebec, and why it wasn't happening elsewhere.
Since then, more data have come in, and it seems pretty clear that there's a glitch in the Quebec LFS numbers. There are several graphs below the fold.
With all the doom and gloom about Europe’s economy and the debt crisis, some recent statistics from the Italian Central Bank caused me to reflect that despite its problems, the Italian economy is more robust than one might think because of its strong performance when it comes to private wealth.
The hunt for data that are consistent with the sharp drop in employment reported by the Labour Force Survey in November and December (,) continues. Today's release of initial Employment Insurance claims for November don't look like what we'd see in an economy that was seeing a sharp jump in unemployment:
It turns out that almost all of the bad news comes from two consecutive bad LFS numbers from November and December. As I discussed here, there's a certain amount of sampling error associated with the LFS data, and the standard errors are larger for subsamples. There's still a non-negligible probability that I'm making a big deal out of statistical noise. And there's as yet no other independent source that could confirm or contradict the LFS.
This is troublesome, because employment is generally a lagging indicator for the business cycle. If training new workers is costly, then firms would generally prefer not to lay off the workers they've already trained, and they will hesitate to hire until they are certain that they will be able to recover the costs of training new workers. So it just doesn't seem right that the first sign of a possible Quebec recession should be a drop in employment. Other things should have happened first.
But the LFS is all we have to work with, so that's what this post is based on.
I generally don't pay much attention to the month-to-month changes in the provincial employment numbers, but there's something going on in Quebec.
I sometimes like to look at Canada through the eurozone lens: both are monetary unions in which certain regions have done better than others. For example, there are some interesting parallels between Spain and Ontario, in particular, the fact that employment losses in Spain and Ontario were disproportionately larger than employment losses elsewhere in Europe and Canada.
So this post addresses the question of to what extent Spain's and Ontario's problems are due to the fact that they are obliged to live with a monetary policy stance that is not necessarily designed in their interests. Or is the problem the monetary union itself?
The consensus outlook for Canadian economic growth in 2012 is generally tepid, with the possibility of another international financial crisis tipping us into recession as it did in the fall of 2008.
After looking over the potential sources of growth, it's easy to see where this consensus came from. One of those data-intensive posts with lots of graphs is below the fold. I don't necessarily have a profound insight, but I think it's useful to look through the numbers in order to get a better idea of where we are and how we got here.
I've seen a few stories about recent trends in wages, and too many of them seem to be trying to make a big deal out of movements that - when in put in context - are really too small to say much of anything.
[Updated in an almost-certainly futile attempt to combat confirmation bias.]
A couple of weeks ago, I noted that as far as I could make out from available data, rates of job creation returned to pre-recession levels more than a year ago. This time, I'm going to try to get a handle on the gross flows on the other side of the market - that is, in and out of unemployment. What are the rates at which workers are losing and finding jobs?
Pundits and politicians are calling on the government to "do something" about the state of the Canadian labour market; these calls are presumably based on a perception that job growth is still weak. It's not clear upon which data this assessment is based. The data that would be most informative are no longer being collected, and the best available proxy that I can find suggests that rates of job creation are back to pre-recession levels.
In my final class lecture this week on ancient and medieval economic thought, I discussed the work of Nicholas Oresme (1320 to 1382), a French Roman Catholic bishop who was also a philosopher, mathematician and an economic thinker. I found it interesting to see a career link between mathematics and economics so early on. More interesting, he appears to be the first monetary economist with what is probably the first comprehensive work on money titled De origine, natura, jure et mutationibus monetarum, translating into A Treatise on the Origin, Nature, Law and Alterations of Money. Oreseme seems to be the first articulate proponent of a stable rules based monetary environment as he argues that as the laws of a country should not be changed without a demonstrated need, neither should the monetary system.
This fascinating story came out during the psychodrama of the US debt ceiling:
U.S. Treasury debt prices soared on Friday on fears a U.S. default could trigger a shortage of Treasuries and even push the world's largest economy back into recession.
On the face of it, this makes no sense. The market's reaction to a higher perceived probability that the US would default on its debt was to demand more US debt? If the markets behaved this way with Greece, there'd be no Eurozone debt crisis.
According to a report by Bank of Nova Scotia economists Derek Holt and Karen Woods, Canadian businesses have begun to pull back on investment and accumulate inventories which may be a sign that the economy is about to head into another recession. After the surprise second quarter drop in GDP, if there is another drop, it would mean that Canada has slipped into recession ahead of most other countries.
According to a recent Nanos poll conducted for the Globe and Mail, after health care, the economy/jobs is the top concern of Ontario voters this fall election. Ontario voters may be interested on how employment growth has fared in their particular neck of the woods under various political regimes.
The BEA's advance estimate for 2011Q2 GDP growth was accompanied by news that 2011Q1 growth had been revised from 1.8% to 0.4%. This is bad enough, but the data revisions are much, much worse than that. Here is a graph of the data that were archived by the St Louis Fed last month, along with the most recent BEA data:
This is very, very bad news.
Recessions generate many statistics but in the end its all about the people and their families. Statistics Canada today released family income data for sub-provincial areas for 2009 taken from the 2009 personal income tax returns.