Recent Posts

Friday, June 5, 2020

Labour Market Bounce

Chart: U.S. Employment-to-Population ratio


Both Canadian and American labour market data for May surprised to the upside, and the Treasury market has sold off.

My view always was that guessing what would happen this month is a bit of a waste of time, and we won't get a clean read until the June data. A mechanical bounce in employment was always in the cards, the question is when, and at what levels.
The figure above puts the U.S. data into perspective. The pandemic has disrupted data measurement, but one can hope that the sample of households polled remains representative. The latest data point shows a bounce, but the level is far below pre-pandemic levels. The authorities have to hope that the upcoming months closes more of the gap.

Chart: Unemployment rates, Canada and Quebec
The figure above shows (non-seasonally adjusted) unemployment rates for Canada and Quebec. The Quebec unemployment rate contracted a decent amount, but the unemployment rate is still well above the level seen in the Financial Crisis. I have not dug into the data yet, but from reports I have seen, the unemployment rate is masking unusually high levels of underemployment (e.g., hours worked).

The risk is that thinly-capitalised firms continue to fail. This will be a much slower-moving process, and will be easier to track in the data. One can hope that the income injection from the governmental sector will offset these losses, but that remains to be seen. Another thing to keep in mind is that the United States might decouple from other countries, in that the population seems to have given up on caring about the pandemic.

With two month's data under our belt, I hope to start looking at the data in more detail, so as to be ready for the June employment data. The question is to get a clean read on how much unemployment remains once the relatively safe industries have returned to work. That will tell us how large a policy challenge countries face in the quest to return to something resembling full employment.

(c) Brian Romanchuk 2020

No comments:

Post a Comment

Note: Posts may be moderated, and there may be a considerable delay before they appear.

Although I welcome people who disagree with me, please be civil.

Please note that my spam comment filter appears to dislike long "anonymous" posts.

Note: if you want to post comments from Apple devices (iPhone, iPad), you apparently need to turn off "prevent cross-site tracking" in Safari privacy settings. (The reason presumably is that another URL handles comments, and so the user session needs to be preserved when redirected to that site. I don't like this, but this is not enough to make me switch my hosting service.)