According to this morning's Labour Force Survey release (the LFS is a mandatory survey that uses census data – are its days numbered, too?), 97% of the jobs that were lost to the recessions have been recovered. This, along with 78% of GDP (April data) and 64% of hours worked (3-month average) regained makes for the following graph:
There is a lively debate in the US about whether it should start reducing its deficit now or add more fiscal stimulus (or some, even). But we should remind ourselves once again that Canada is not the United States: employment there has barely begun to come back, and is still more than 5% below its peak.
Canada is now at the point where monetary policy can address the remaining slack, so there's little harm in letting the federal stimulus run out its course next March as planned.
Worthwhile Canadian Initiative 
Plus, labour productivity (GDP/hours worked) seems to be rising again over the last 6 months, and is about 1% above where it was before the recession, which is good.
That graph gives an interesting perspective on Okun’s Law (that over the business cycle, %change in GDP = K times %change in employment). K is now about 2 for # of workers, but about 1 for # of hours worked. For a Cobb-Douglas production function, with labour the only variable input, K should be less than one, and about 2/3rds. The change in the hours worked per worker explains most of the puzzle. Presumably, the rest is explained by “labour hoarding”, with workers not working as intensively even for a given number of hours, because firms can’t sell the extra output, but don’t want to layoff workers they might need again in a recovery, and don’t want to cut their hours too much either.
But is monetary policy in Canada at the point where it can address remaining slack? I think a good part of Krugman’s argument for continued fiscal stimulus in the States is that they remain at the zero-lower bound. Have we escaped the liquidity trap? Or were we ever there?
Just asking.
Maybe not now. But if interest rates move up between here and March, the Bank of Canada should have some room to play with if the removal of the federal stimulus goes less-than-smoothly.
Now what?
Prepare for immigration from the U. S.
😉
“Plus, labour productivity (GDP/hours worked) seems to be rising again over the last 6 months, and is about 1% above where it was before the recession, which is good.”
Interesting that labour productivty is rising as we emerge from a recession when we are presumably adding numbers to our workforce – often productivity spikes when heading into a recession.
More generally, a series of blog postings on productivity in Canada would be most welcome. It is a really big issue with governemnt economists (i.e. Carney, Lynch, etc.) right now and at times it seems like political decision makers are becoming mildly interested. Many think Canada is in a productivity crisis, some think its overblown. It would be interesting to see what the contributors think.
Funny you should ask…just working on a couple of productivity papers.
Let’s see…..we’ve been looking at the reliability of “the latest” productivity growth numbers. The aim is just to get a feel for how bad the data revision problem is for productivity data and, therefore, how big a grain of salt we need to take with statements like “labour productivity (GDP/hours worked) seems to be rising again over the last 6 months.”
We got a surprise; data revision looks to be a bigger problem in labour productivity than in either the GDP or the employment data. This, despite the fact that we’re using GDP/employment as our labour productivity measure, (We thought the data revision problems might be smallest that way.) The figures depend a bit on how you want to measure productivity. With 4Q changes in productivity, we got a noise-to-signal ratio of a bit over 50%, which bumps up to 75% for 20Q changes. Put another way, the revisions to those 4Q changes have a standard deviation of about 0.7%; a 95% confidence interval means putting a range of +/- 1.4% around your initial estimates.
Revisions looked relatively worse in the US.
Stephen, 78% of GDP and 64% of hours of worked doesn’t sound like a “nearly complete” recovery to me. Erin Weir at the Progressive Economics Forum has highlighted some important statistics that you’ve neglected to mention:
* “this welcome decrease in unemployment was entirely concentrated in three provinces: Ontario, Quebec and Manitoba.”
* “Employment gains were evenly split between full-time and part-time work.” So it seems that workers’ income security is declining even as employment is increasing.
* “Employment declined in goods-producing industries. All of the employment gains were in the service sector. . . .” We know that jobs in goods-producing (export) industries tend to pay more than jobs in retail, wholesale, and personal care, so there is an important qualitative difference in the jobs being “regained.”
The stats you’ve presented gloss over these important realities.