Inside the labour market downturn

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By Jason Gilmore and Sébastien LaRochelle-Côté

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The Canadian labour market lost more than 400,000 jobs during the first 12 months of the recent downturn.

Although initial job losses were steeper in the recent downturn, employment rebounded earlier than in the downturns of the 1980s and 1990s.

As in previous downturns, the number of working-age people without a job increased. Between October 2008 and October 2010, the number of non-workers increased by 800,000. Increases occurred in both the unemployed population (341,000) and individuals not participating in the labour force (458,000).

Changes in the unemployed population were not just due to layoffs. Although the number of layoffs increased by 30% over the period, other categories, like new entrants and re-entrants coming back after a period of labour market inactivity, also increased (33%). In the previous downturns, layoffs made up a larger portion of the unemployment increase.

The growth of the non-participant population was mainly attributable to increases in the number of students and, to a lesser degree, the number of seniors. Although the number of discouraged searchers increased, that group consistently represented less than 1% of non-participants.

Even though employment rebounded sooner than in earlier downturns, the number of individuals who worked part time but who would have liked to work full time increased by 20% over the period. As of October 2010, the Canadian labour market still had 113,000 fewer people working full time than in October 2008.

Alternative measures of unemployment that incorporate discouraged searchers, the marginally attached and involuntary part-timers can be calculated. Regrouping these three populations with the unemployed population would boost the unemployment rate by about 25%, but would produce a rate moving in tandem with the standard unemployment rate.