The Unemployment Rate and Labour Force Survey (LFS)

• The unemployment rate measures how the labour force of a country is doing during an economic cycle and how it is impacting people's lives.
• The unemployment rate is a lagging indicator and rises only after the economy is in a recession.
• The unemployment rate varies over time, and tends to fall when the economy is doing well but rises in recession times, making it a counter-cyclical variable.

The Labour Force Survey (LFS)

• Statistics Canada computes the unemployment rate every month, and this data is reported in the LFS.
• The LFS contains information about the unemployment rate by gender, region, age, industry, and education.
• The LFS also reports data on the labour force participation rate, the employment rate, and measures of the unemployment rate, like the long-term unemployment rate.
• Statistics Canada also publishes other surveys about the labour force, including; the Survey of Employment, Payrolls and Hours (SEPH), Employment Insurance Statistics (EIS), and the Job Vacancy and Wage Survey (JVWS).
• The LFS is a monthly nationwide survey by Statistics Canada, conducted among approximately 56,000 households or about 100,000 individuals.
• Participation in the LFS is mandatory.
• The LFS is published ten days after the completion of data collection.
• In December 2024, employment rose by 91,000 (+0.4%), with the employment rate increasing by 0.2 percentage points to 60.8%.
• The unemployment rate decreased by 0.1 percentage points to 6.7%.
• Employment gains were led by educational services (+17,000; +1.1%), transportation and warehousing (+17,000; +1.6%), finance, insurance, real estate, rental and leasing (+16,000; +1.1%), and health care and social assistance (+16,000; +0.5%).
• The unemployment rate decreased from 6.8% in November 2024 to 6.7% in December 2024.
• The unemployment rate was 5.8% in December 2023 and 5.0% in December 2022.
• Unemployment has steadily increased since the beginning of 2023, after record lows of 4.9% in July 2022.
• The civilian working-age population is defined as individuals aged 15 and over, split into employed, unemployed, and not in the labour force.
• The LFS excludes those who are in institutions, such as prisons or long-term care facilities, and regular members of the Canadian Armed Forces.

Classifying Employment Status

• Employed People include:
  • Those who did any work at all at a job or business for pay in an employer-employee relationship.
  • Those who are self-employed.
  • Those who had a job but were not at work due to illness, disability, personal/family responsibilities, vacation, labour disputes, etc.
• Unemployed People include those that during the week of the survey were:
  • On temporary layoff with an expectation of recall and were available for work
  • Without work, had actively looked for work in the past four weeks, and were available for work.
  • Had a new job to start within four weeks of the week of the survey and were available for work.
• Not in the Labour Force include those:
  • Unwilling or unable to offer/supply labour services under existing market conditions.
  • Retirees, those unable to work for particular reasons, and full-time students.

Calculating Labour Statistics

• Labour force (LF) = number of people employed (E) + number of people unemployed (U)
• Unemployment rate = (number of unemployed persons / Labour force) x 100 = (U / U+E) x 100
• Employment rate = (number of employed persons / Working-age population) x 100 = (E / WorkPop) x 100
• Labour force participation rate (LFPR) = (labour force / Working-age population) x 100 = (LF / WorkPop) x 100
• In December 2024, Labour force = E+U = 20,738,300 + 1,492,100 = 22,230,400
• Unemployment rate = (1,492,100 / 22,230,400) x 100 = 6.7%
• Employment rate = (20,738,300 / 34,124,700) x 100 = 60.8%
• LFPR = (22,230,400 / 34,124,700) x 100 = 65.1%
• The unemployment rate measures the percentage of the population 15 years and older who are actively seeking work but cannot find jobs.
• The official unemployment rate may underestimate the real number of people without jobs.
• Workers outside the labour force or discouraged are not counted as unemployed in the official rate.

Discouraged Workers and Supplementary Measures

• Official labour force is 100 people, 10 are unemployed and 90 are employed.
• In the economy, 100 people do not have jobs and have given up looking for one.
• The official unemployment rate is (10 / 100) * 100 = 10%.
• With discouraged workers included, the alternative unemployment rate would be (110 / 200) * 100 = 55%.
• Statistics Canada publishes supplementary measures of unemployment to account for discouraged workers or workers no longer in the labour force.
  • R1: Unemployed 1 year or more.
  • R2: Unemployed 3 months or more.
  • R3: Comparable to the United States rate.
  • R4: Official rate.
  • R5: R4 plus discouraged searchers (workers who want to work and are available to work but who have given up looking for a job)
  • R6: R4 plus waiting group (people available for work and waiting to hear from a potential employer)
  • R7: R4 plus involuntary part-timers (in full-time equivalents) (workers in the job market but who feel that they are not working as many hours as they should)
  • R8: R4 plus R5 plus R6 plus a portion of R7 (the broadest measure of the underutilization rate)
• The supplementary unemployment rates data is not seasonally adjusted.

Key Facts

• In 2024, the official unemployment rate was 6.4% (implying 1.42 million unemployed), but R8's broadest measure jumps this number to 1.90 million.
• The official unemployment rate doesn't count these additional 480,000 people as unemployed.
• Policymakers monitor long-term unemployment.
• A long-term worker is classified as being unemployment for more than 27 weeks.
• The government knows the amount of long-term unemployed workers there are so they can but policies in place to help them retrain or find a job
• The LFS reports unemployment rate by region, gender, educational attainment, age and by industry
• There are significant disparities in unemployment rates across provinces in Canada and by age and educational attainment
• Policymakers need these differences at the micro level so they can design and implement the appropriate policies to address any problems related to unemployment
• The unemployment rate varies greatly from province to province
• Eastern provinces have higher unemployment rates than the rest of Canada
• Newfoundland & Labrador had the highest unemployment rate at 10% (3.6 percentage points higher than the national average of 6.4%) in 2024
• Manitoba had the lowest unemployment rate at 5.3% (1.1 percentage points lower than the national average in 2024)
• Difference in unemployment rates used to calculate unemployment insurance level
• Most Canadians need 420 - 700 insurable employment hours in the past 52 weeks for employment insurnace
• Workers in high unemployment regions need a lower amount of insurable employment hours to quality for employment insurance
• Older workers have lower unemployment than younger workers.
• From 1976 workers aged 25-54 have had about 4.8 percentage points lower than workers aged 20-24
• Different between teenage youths and adults aged 25-54 is even more drastic at 10.6 percentage points.
• Despite higher unemployment, young workers now account for a smaller proportion of total unemployed compared to the 1970s and 1980s.
• Higher education correlates with lower unemployment.
• In 2024, high school degree unemployment rate was 3.2 percentage points higher than bachelors and 3.5 percentage points higher than the graduate degree.
• Since 2000s, unemployment rates between bachelors degrees and post-graduate degree have been small
• Males and females fare differently in the labour market
• Since 2000, female unemployment has been lower than male by 0.83 percentage points.
• Since 1990s, the rate of females is lower than that of males because of industry concentration
• The shift from manufacturing to service economy has favored women as women are more represented there
• Service sector has lower unemployment than the goods producing, and the proportion of females employed in the service-producing sector is higher than males
• Women tend to work in jobs less sensitive to economic downturns like healthcare, government and education
• Men tend to work in cyclical industries like constuction and manufacturing, which experience greater job loss during recession
• Female workers have higher education then mean
• Numerous factors explain females in the paid work force:
  • Society's views on gender roles evolved
  • New technologies in home
  • lower fertility rate
  • More opportunities to find employment in service
  • Higher education

Labour Force Participation Rate (LFPR)

• The LFPR is the percentage of the adult working population in the labour force.
• The LFPR steadily rose from 1976 until the beginning of the 1990s, and then fell in early 1990s, and then increased to the Great Recession of 2007-2008
• Primary increase is women and prime-age workers
• After recession, the LFPR decreased
• Decline since 2007 is worrisome
• Decline is because:
  • Population ageing
  • Baby boomers moving out of the work force
  • More young people are staying in school longer
  • automation
  • Technology
• The trend of the LFPR differs from males and females, with female labour force participation rate from around 45.4% to 61% in increase of 15 percentage points
• The male labour force participation rate decreased from around 78% to 69% in decrease of 11 percentage pionts
• Decline in male participation accounts for fall in the overall LFPR since 2007
• Increase by rising labour force participation rate especially in service
• Improved health and longevity

LFPR Canada vs US

• Decline in the labour force participation rate has been more dramatic in Canada.
• Declines in the LFPR among prime-age males have been less in severe in countries with stronger social safety nets, more robust public investment in skills retraining.
• Increase in nonparticipation among prime-age men
• Since chronic pain and reliance of opioids has contributed to male declining participation
• 45% of non-participating men report daily use of opioids
• Falling educational attainments and job opportunity
• Declining marriage rates
• The LFPR of female prime-age workers has increased
• Canada has more generous parental leave policies and Subsidized childcare
• A portion of workers aged 55 and older voluntarily left their jobs, called the "Great Resignation"
• Health concerns and health conditions increased their financial situation
• This exit caused worker shortages
• Businesses are more reliant on training for young workers
• Each country measures unemployment differently
• The U.S. and Canada measure unemployment differently
• 15 is included in Canada, but not in the U.S., but they are in Canada and most of Europe
• the most important difference is in the definition of what counts as “active” and "passive” job search methods
• An unemployed person in both does not do any paid work, must be available for and has tried to seek work during the month's survey
• But in the U.S. that person must actively looking for work such as interview
• In Canada, you can be unemployed by passively looking job advertisements.
• Because of differences in how we measure unemployment in each country, comparing unemployment rates is not always possible
• OECD standardizes unemployment rate