EI Claims Up in September

The bulk of the descriptive meat is here:

“Continued large year-over-year increases in EI beneficiaries in large centres in the West

EI data by sub-provincial region, sex and age are not seasonally adjusted. Therefore, they are compared on a year-over-year basis.

In Ontario, the number of EI recipients more than doubled in 10 of its 41 large centres between September 2008 and September 2009. In the southern part of the province, Hamilton and Kitchener saw the fastest increases in the number of beneficiaries. In Hamilton, the number of EI recipients rose from 4,800 to 10,400, while in Kitchener, the number increased from 3,900 to 8,400. At the same time, the number of EI recipients in Toronto rose from 46,300 to 86,600.

In the northern part of Ontario, Greater Sudbury continued to experience a sharp year-over-year increase. The number of EI recipients rose from 1,500 in September 2008 to 3,900 in September 2009. At the same time, employment in Greater Sudbury declined, mostly in the natural resources sector.

The large centres of Alberta with the fastest year-over-year growth rates were Grande Prairie, Calgary, Medicine Hat, Red Deer and Edmonton. In Calgary, the number of people receiving regular benefits increased sharply from 4,000 to 18,800, while the number of beneficiaries in Edmonton rose from 3,800 to 14,900. These steep increases coincided with year-over-year employment losses for the province in manufacturing; natural resources; and retail and wholesale trade.

In British Columbia, 15 of its 25 large centres had twice as many beneficiaries in September 2009 compared with September 2008. In Vancouver, the number of beneficiaries increased from 12,600 to 31,300, while in Victoria, the number rose from 1,600 to 3,700. During this year-long period, employment losses in the province occurred in a number of industries, with the largest declines in construction; professional, scientific and technical services; manufacturing; and transportation and warehousing.”

The full report is here.

The War on EI reform Commeth

Conservative economists are up in arms that anyone could suggest lowering the qualification requirements for workers wanting to access an insurance program they are obliged to contribute but for which they do not necessarily have access.

Case in point, Stephen Gordon an economist at Laval was interviewed on CBC and he had the temerity to assert that the opposition parties were purporting to return Canadians to the dark days of UI dependency where workers worked 10 weeks and then took a “vacation” (10-42 which he admits was a small group of “users”).   An honest look at the previous programme would conclude that although there was a small user base of “bilkers” the other group was more a victim of a defunct east coast growth paradigm, entrenched rural local business interests and governments bereft of vision (with some irony what we might call an “industrial policy” the very thing conservative economists hate).  It would in fact take the complete collapse of the fishery to provoke a fundamental rethink of the structural dependence by design aspect of the old UI system. Apparently this is wrong.  They still have not yet arrived at areal solution for the structural dependence on the EI program.

But all of this is beside the point.  No one in the opposition is suggesting a return to UI as a guaranteed income scheme.  Although I do not know why this should disturb a conservative economist?  Conservative economists tend to love programs which enforce some requirement to work.  Let us call this their Victorian vice.  Indeed the reason conservative economists like the WITB is because it gives an incentive to welfare recipients an incentive to work.  It is therefore somewhat perverse that they should prefer to exclude formally employed workers from the EI system so that they can go on welfare and then be incentivised to work through programs like the WITB.  In a bizarre twist during the interview Gordon suggested that while access to the program (which all workers are forced to contribute) should remain restricted those who do qualify should have their benefits increased!  A new moral milestone: not only a distinction between the deserving poor but a distinction of merit between deserving and undeserving workers:  All enough to make a good Victorian blush at the recognition of their Dickensonian sentiments.

But I digress.  Gordon even went further and conceded that relaxing the qualifying criteria would only benefit 2% more of the unemployed.  He went further to say that there were other ways to help the poor: such as beef up the GST rebate.  For a man who does not receive the GST rebate and is woefully ignorant of how much income replacement it would represent it was not only callous it was disingenuous.  It was disingenuous because Mr. Gordon knows full well the EI system should be well funded requiring no draws on general revenue. It was only a fleecing of the program which moved billions from the program to general revenue that voila the program needed extra funding.  As an aside, this is why the finance minister’s suggestion the increased EI payments are partly to blame for the increased deficit ring hollow.  It was that minister who raided EI to make room for his silly tax cuts.

But the point is this, there is no choice between increasing benefits or increasing eligibility if we make an honest accounting of how large the surplus was in the EI fund.  Similarly it is a false choice between beefing up the GST credit or the WITB program or extending eligibility.  The EI fund should be fat; it was raided to pay for silly tax cuts that even the economist in question wrote a long blog post against.  It is therefore disingenuous to turn around and make it a question of where money is best spent.  EI is paid for by employers and employees, the fund was fat, and it was depleted by a raid on what appeared to be its fat in good times.  In short, the trade off can only be posed if one accepts the hanky panky involved in the raiding of the EI fund.

Why is EI different than unconventional monetary policy?

Apparently because bankers are more trustworthy than the newly unemployed.  I would call it irony but that would require a sense of naïveté that even Pollyanna could not manage. So these days we have monetary authorities contemplating negative interest rates but we are suppose to get our collective skirts in a knot over whether or not some workers might take advantage of a relaxed EI system.  So let me get this straight 20,000 workers bilking the system for a billion dollars is a moral outrage but five banks bilking the system for untold billions is good policy?

Monty Python comes to mind. To wit: “who is the king around here?” Demands the newly arrived aristocrat.  Oh “that is simple” says the peasant.  “He would be the one with out shit on him.”

Why don’t you ladies (ahem and gentlemen) finally go to bed?

Some Gloom from Around the World

Germany has announced a predicted 6% contraction for 2009.  Unemployment is over 8%.

Japan has announced a predicted 3.3% contraction for April 2009 to April 2010.

The UK is sticking to its 3.5% contraction call for 2009.  Unemployment is currently 6.7%

The US just came out with dismal numbers (-6.1% for the first quarter) and the projected contraction for 2009 is officially still 1.2%.  Unemployment is 8.5%.

Ireland has projected a 8.3% contraction and unemployment is now over 11%.

Sweden is projecting a 4.5% contraction for 2009 and unemployment currently is over 8%.

China where good data is is hard to come by is looking at projected growth of 5-7%.  But to put that into perspective it translates into a roughly estimated 40-50 million unemployed workers!

Canada has projected a 3% contraction for 2009 and currently has unemployment rate of 8%.

Bank of Canada Beats a Retreat on Optimism

Well I do not mean to brag but I did argue at the time, along with others, that Mark Carney and the BOC were being overly optimistic to which the usual suspects countered that the BOC had super superior models and modelling acumen. So it was, as it is now that Super Mark and the BOC are beating a hasty retreat from their rosy optimism. The globe reports:

The Bank of Canada cut its benchmark lending rate to the lowest possible, and promised to leave it there for as long as a year in order to fight a recession that is deeper and will last longer than previously thought……

The central bank now predicts that Canada’s gross domestic product will shrink by 3 per cent in 2009, compared with a January estimate for a 1.2-per-cent contraction.

The Bank of Canada also abandoned its relatively optimistic estimate that the economy would rebound to expand 3.8 per cent in 2010. The recovery will be far more muted, with an expansion of 2.5 per cent in 2010, the central bank said.

Mr. Carney and his chief advisers on the governing council are trying to restore confidence amid Canada’s first recession since 1992. Employers have shed more than 270,000 jobs since the country fell into a recession in the fourth quarter, a period during which factories produced at only 75 per cent of their capacities, the lowest rate on record…..

Hmm…maybe we start taking fiscal policy a little bit more seriously now and not its faux ami tax cuts?

Related:

Erin Weir on BoC rate cut.  Better Late Than Never

Alternatives for Autos?

The Auto Crisis:
Placing Our Own Alternative on the Table

Sam Gindin

Deep economic crises violently interrupt daily lives and force more radical responses onto the public agenda. In the case of the North American auto industry however, that radicalism has been remarkably one-sided. Absent an alternative of their own, workers were (and remain) trapped by their dependency on ‘their’ corporations becoming stronger. On the one hand, corporations and governments have aggressively attacked auto workers and effectively ended their status as the trend-setters for working class gains; on the other, there has been virtually no work interruptions or effective political response from the auto unions.

In the now 100 years since Henry Ford first introduced the assembly line (1908), only the Great Depression matches the present crisis in terms of its impact on the U.S.-based auto companies, their suppliers, and the workers and communities involved. At that time, workers responded with the breakthrough of industrial unionism. Can auto workers respond as creatively today?

The Road to Nowhere

At his first press conference after replacing the former head of General Motors, GM’s new Chief Executive Officer seemed to offer some relief to Canadian auto workers. The new collective agreement in Canada, Fritz Henderson declared, made the Canadian workforce “fully competitive with the UAW” (Globe and Mail, March 31, 2009).

The catch of course was that this was not the end of the story. Soon Henderson was warning that, “We need to go further, you can’t really afford to take anything off the table” (CNN’s “State of the Union”). Part of shunting Richard Wagoner, the former head of GM aside was to put more pressure on the UAW to reopen their agreement and make even more concessions. And as that occurs, GM will surely return with more demands on the CAW.

It used to be that corporations promised jobs for concessions; now they aggressively demand more concessions alongside fewer jobs. That earlier trade-off was of course always a myth. Concessions don’t save jobs because in a capitalist economy, corporations driven by profits and limited by competition or consumer demand won’t or can’t deliver on job guarantees…..Continue reading

New unemployment numbers: carnage continues

The StatsCan release is here.

All in all a fairly brutal LFS.  Ontario continues to get hammered suffering a disproportionate number of job losses and with the high wage sectors continuing to take a beating.  The only dimly bright spot in the LFS data being that outside of the number (volume) of unemployed no new records appear to have been set this month.  And while it is true that we are now at 1997 levels in terms of the absolute number of workers unemployed this obsevation ought to be tempered by the fact that there is a larger absolute labour force today than there was in 1997.

In terms of the actual unemployment rate, no new records (going back to 76) have as yet been set.  However, given the size of the LF actually increased this month the reported rate of 7.7% actually underestimates the degree of unemployment.

In the chart below I adjust for this by plotting a second measure of unemployment which simply divides the number of unemployed by the number employed (UE/E light).  The second plot (UER) is the standard rate.  What is interesting is the severity of the steepness in the angle of the increase of unemployment–it is steeper than the 90s recession and almost on par with that of the early eighties.

All that said there is a still a long way to go before we get to the unemployment rates of the ugly eighties and nasty nineties.  My gut says we are going to get at least to the record rates of the 1990s but the real fear is how long unemployment rates last rather than how high unemployment rates go.  That is, a record in the duration of above trend unemployment will be much more devastating than a record in the one month rate.

More to come

Mr. Gardner you got some splainin’ to do

Over at the Ottawa Citizen there is worthwhile attempt to keep the economy in perspective.  The watch phrase seems to be “do not panic.”  The implicit premise being that panic is driving bogus assessments of the extent of the turmoil unfolding in the economy and the labour market.  At least that was the premise of Gardner’s blog post:  StatsCan, you got some splainin’ to do .

For my part I am quite happy to the see that someone in the press is actually taking a look at the numbers.  The problem is, in this case, Mr. Gardner does not seem to be generating his own numbers.  He claims that Stats Can erred when it stated that:

This drop in employment exceeds any monthly decline during the previous economic downturns of the 1980s and 1990s.

Mr. Gardner argues that based on the Stats Can press release that reporters went about generating seriously flawed headlines.  I quote:

In one news story after another, we were told that the monthly job loss figure was worse than any in the recessions of the early 1990s or the early 1980s. This isn’t just bad, we were effectively told. This is unprecendentedly (sic) bad.

Mr Gardner goes on to say:

But that conclusion is based on a grade-school mistake: The labour market isn’t the same size today as it was in the early 1990s or early 1980s. It’s bigger. A lot bigger. For the stat to tell us how bad this drop was relative to those in other recessions, it has to take that into account.
Do that and it’s not the worst drop since the data were first gathered in 1976. It’s the third worst.

Now when I first read this I thought that Mr.Gardner’s conjecture was likely right.  The labour force is a lot bigger so all things being equal a large drop-off in unemployment might be relatively less severe than at other periods in the past.  It would have been nice if Mr. Gardner had presented his readers with the data or the formula by which he arrived at his conclusion.

So this morning I took a virtual walk over to Stats Can and pulled three series to be exact: Labour Force 15+; Employment; and Unemployment. All monthly and seasonally adjusted going back to 1976.

Why unemployment when this relates to Stats Can’s claim about employment?  Charity and balance is the answer.

So let us see if we can verify Gardner’s claim that Stats Can got it wrong and the press is full of a bunch of gloomsters.

In this graph two measures of employment loss are plotted.  One is the absolute loss of jobs (in black).  Here Stats Can is correct the 129,000 jobs was the most jobs ever shed since 1976.  But what of Mr Gardner’s point about the changing size of the Labour market?  The second measure captures this.  The pink line is the percent change in employment month over month.  Given that employment already accounts for 92% + of the total labour force it is by definition an ok approximation of the relative size of the Labour force.  And here again we are in Historic Territory: the fall in employment was the largest relative fall since 1976.

But what if something really funky was going on with the labour force? That is, what if we used the labour force to generate our relative assessment.  This seems to be Mr. Gardner’s acid test.  Always dutiful I did that too. Here the  change in employment was calculated as the absolute change in employment divided by the labour force.

Here again it would seem, according to the Stats Can data, that January was indeed a unprecedented happening.  No matter how one cuts-it, the Stats Can conclusion that “this drop in employment exceeds any monthly decline during the previous economic downturns of the 1980s and 1990s”  was exactly right.

To be fair to Mr. Gardner we could, however, take a different look at the employment situation and see if one could generate a much less novel conclusion.  For that I took a look at unemployment.  What I did was simply take the monthly unemployment rate and subtract Ti from T-i.  This will tell us if the jump in unemployment in January was higher than during any other time since 1976 (remember this has nothing to do with the Stats Can claim; that was purely about employment).

Clearly by this metric no records were being set (yet). The problem is, however, this metric does not take into account the changing size of the labour force. Well it in fact does, it is just that if the labour force is contracting it understates the unemployment level.

How to account for Mr. Gardner’s claim that if we adjust for labour market size “it’s not the worst [employment] drop since the data were first gathered in 1976. It’s the third worst”?

I must confess I do not really know because Mr. Gardner does not present any data nor the formula he used to arrive at his conclusion.  I am racking my brain to see if I can find some exotic data manipulation exercise  to get to that conclusion based on the Stats Can data.  But even if I did find a way and could manipulate the data I would be far away from dealing with the basis of Stats Can’s claim.

Now, if I’ve misunderstood something, I’d be delighted to be corrected. But if I’m right, I think Mr.Gardner got some splainin’ to do.

Canadian Unemployment Explodes

The Labour Force survey is out and it paints a pretty grim picture of the state of the labour market in Canada.

January 2009 (Previous release)

Employment fell by 129,000 in January (-0.8%), almost all in full time, pushing the unemployment rate up 0.6 percentage points to 7.2%. This drop in employment exceeds any monthly decline during the previous economic downturns of the 1980s and 1990s (emphasis added).

Ontario, British Columbia and Quebec led the country in terms of absolute job losses. Equally as important is that job losses were concentrated among the full-time 24-54 age group which is the stable core of the labour market.  It should be noted that the unemployment rate is an understatement because labour force participation rates also declined.

Graph: Statistics Canada

Graph: Statistics Canada

Gindin 1 Hargrove 0: GM announces 1000 less jobs

Travis Fast

If I know Sam Gindin at all he is less than elated about today’s announcement by GM.  Nevertheless Sam and many CAW activists have long argued that givebacks do not save jobs.  It was a little churlish of officials with the CAW to point to the Feds as part of the problem.  GMs announcement today was simply a confession that management had made huge errors in betting so much on large gas guzzling autos.  The FT reports that GM is even considering spinning off the Hummer Brand.    Ten cents off the Canadian dollar will not remedy the problem.