How much confidence should we have in the job numbers?


Statistics Canada reported that employment rose by 51,000 in February.

These numbers seem to gyrate tremendously from month to month in a way that has little to do with economic fundamentals: jumping by 40,000 in December, falling by 22,000 in January, and now rising significantly.

How much confidence should we have in them?

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Three predictions for the January job numbers


On Friday Statistics Canada will release its estimates of the January job numbers, and after about 20 minutes of statistical modelling, using fuzzy data, over a small glass of red wine, I am prepared to make three predictions, albeit with different degrees of confidence.

First, I am most confident suggesting that January’s job growth will be less than the 40,000 recorded in December; second, I am confident that it will be less than 21,000, which is the average monthly change during the recent past; and third, if I had to offer a single number, I’d say the economy added only about 1,700 jobs in January.

All three ingredients—the statistics, the fuzzy data, and the red wine—were important in making my forecast, but realizing the data are fuzzy was crucial.

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Secure jobs on the rise in Canada, but the young are still shut out of the jobs market

Mr. Carney can’t push on a string. And he knows it.

His now famous comment labelling the stockpiles of retained earnings held by Canadian firms¬† as “dead money”, while perhaps being the most memorable quote of 2012, must also have been made out of a certain frustration that even this superstar central banker faces limits in his powers to push, encourage, and otherwise jumpstart business investment.

The Governor of the Bank of Canada knows that the flip side of dead money is insecurity in the jobs market.

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Why there are better ways to measure unemployment

The state of the jobs market is best assessed by a number that is not given enough attention by Statistics Canada, and the many media reports based upon its monthly press release.

The headline attention is all soaked up by the unemployment rate and the level of employment, when it really should be something Paul Krugman—the Princeton University economist and New York Times columnist—calls his “favorite gauge” of the employment situation.

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The gap between US and Canadian unemployment rates is bigger than it appears

At 8.1% the unemployment rate in the United States is about one percentage point above the 7.2% currently reported for Canada, but this gap would be almost two percentage points if the Canadian rate was measured in the same way as the American.

This revealing picture from the recent Canadian federal government Budget paints a more accurate portrait by using unemployment rates defined in a similar way across the two countries.

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The burden of unemployment is worse than Statistics Canada’s official number suggests

This morning Statistics Canada reported that the unemployment rate increased to 7.6%, confirming a rising trend since July of last year and still significantly above the low of about 6% just before the recession took hold in the autumn of 2008.

This statistic is probably the closest a number can come to having a human face; it relates directly to the hardship Canadians experience in providing for their families, saving for their retirement, and just meeting their day-to-day needs.

But in the end we can’t clearly see the faces of real people behind this number, which at best is an incomplete picture of waste and hardship.

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