Long-term unemployment in Canada and the US

Last September, I wrote this, in a post where I made graphs comparing the number of long-term unemployed workers in Canada and the US:

The more I look at the US, the more I see unpleasant parallels to Canada's experience of the 1990's - what Pierre Fortin called The Great Canadian Slump. Even after we emerged from the worst of the 1990-91 recession, we still had to deal with a large current account deficit, out-of-control government deficits and significant NAFTA-induced sectoral shifts. The outlook for the US is depressingly similar, although their sectoral shifts are associated with re-allocating resources away from construction and finance.

Here are the updated graphs for the long-termed unemployed (not seasonally adjusted) in Canada and the US:

Five months later, I think we can now agree that the US will be extremely lucky if its experience in the 2010s mirrors ours of the 1990s.

Comments

[Nick Rowe]

Wow! I hope some of the US blogs pick this up. That's a surprisingly (to me) big difference. Maybe there is something to the "recalculation/structural unemployment" idea after all, at least in the US. I wonder which industries the US long-term unemployed are/were in? It's also surprising how low the Canadian long-term unemployed number is.

[ARG]

Much of the structural unemployment in the US is related to the residential real estate (financial services and construction) and auto industries. The US was doing fine until deleveraging forced these structural changes.

We will see how low Canada's numbers are when their day of reckoning arrives...

[Geoff NoNick]

ARG - Canada's days of reckoning were in the early 1990s. Do you observe anything that Canada is doing wrong now that could lead to a "day of reckoning" again in the future? No one here is gloating; if anything, our ultimate "day of reckoning" would be triggered by a failure of the U.S. economy, so we have no reason to hope for it.

[Patrick]

Nick really needs a grad student ;)

Digging around the BLS site, I found this:

ftp://ftp.bls.gov/pub/suppl/empsit.tab4.txt

Might give some clues as to which sectors have lost the most jobs.

It'd be interesting to see the equivalent table for 2008 to 2010. I'm sure the date is on the BLS site, I just don't have the time or skill to free it.

[Luke]

"Five months later, I think we can now agree that the US will be extremely lucky if its experience in the 2010s mirrors ours of the 1990s."

Stephen, does that mean the current US recession will be worse than ours in the 1990s?

[Stephen Gordon]

Looks like it. For example, we were able to take advantage of a 30% depreciation in the CAD to get exports moving. It's hard to see how the US will be able to do that.

[Wendy]

I find interesting that the US shift toward longer term, structural unemployment really began in 2001. The false housing economy fueled by lax lending and lose monetary policy hid that reality from the American people. Political plan? coincidence? bad luck? not sure which.

[westslope]

Fascinating pictures!

Stephen: To what extent did low commodity prices play a role in Fortin's "Great Canadian Slump" of the 1990s? I would have intuitively put commodity price influences ahead of NAFTA adjustments.

I also wonder to what extent information technology impacts are driving the US structural unemployment rate.

FWIW, I believe that Canadians are in for a nasty surprise if commodity prices slump over the next few years. "But everybody said it would be different this time!?!!" Sure.....