State of the labour Market

October Labour Force Survey Preview: Despite Fewer Unemployed, Jobless Spells Remain Long

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Average duration of joblessness is high compared with the low unemployment rate.

So far in 2018, the Canadian unemployment rate has been bouncing around historically low levels. But, despite fairly plentiful jobs, Canadians unlucky enough to get laid off often remain out of work for longer stretches than in previous strong labour markets.

Over the past year, the average duration of unemployment in Canada has averaged 19 weeks, or just under four-and-a-half months. This represents scant improvement from the typical unemployment spell of 21 weeks that prevailed in the wake of the Great Recession. In 2008, when the unemployment rate was last near 6%, average jobless spells were just 15 weeks, or three-and-a-half months.

Duration of unemployment has been trending differently across regions

The average duration of unemployment is elevated relative to pre-recession levels in most provinces. However, the modest decline in the nationwide level since 2014 partly reflects contrasting regional trends, with deterioration in resource-rich provinces partially offsetting gradual improvement elsewhere.

Jobless spells in oil-producing provinces like Alberta and Saskatchewan used to be among the lowest in the country. However, average duration of unemployment in these provinces jumped following the 2014 drop in oil prices and now exceeds the national average. Although average unemployment duration ticked down earlier this year along with improvement elsewhere in Canada, its current level of 21 weeks means unemployed workers in Alberta, Saskatchewan, and Newfoundland are still out of work on average six weeks longer than in mid-2014.

The trend outside natural-resource-oriented provinces has been better, particularly in Quebec. The average duration of unemployment in these provinces is now slightly above 18 weeks, down almost four weeks since mid-2014. Average jobless spells in these provinces remain about three weeks longer than in 2008, highlighting further room for improvement, but they are gradually heading in the right direction.

Long jobless spells should temper our enthusiasm about today’s labour market

On the whole, the Canadian labour market has fared well in recent years, but the story isn’t all rosy. Canadians might now be less likely to get laid off than in previous periods, but those unlucky enough to lose their jobs still remain out of work for relatively long stretches. This is particularly the case in oil-producing provinces like Alberta, where the average duration of unemployment has hardly improved after surging following the 2014 fall in oil prices. Notwithstanding other solid indicators in recent Labour Force Survey data, the Canadian labour market won’t be a complete good-news story until we see jobless spells approaching pre-recession levels.

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