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Post mortem: low-wage workers are lagging behind

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Post mortem: low-wage workers are lagging behind

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Financial Post columnist Kevin Carmichael, editor of the FP Economy newsletter, looks at the week in economics.

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Macklem board

July Labor Force Survey it was a journalist’s nightmare. There was no obvious way to frame it. Good? Bathroom? You could have gone with anyone. Typists don’t like coin tosses. It means that there is a 50 percent chance that someone will yell at us for making a mistake in the story.

Statistics Canada reported on August 6, employers added 94,000 last month, an outstanding result in normal times.

But these are not normal times. Most of Bay Street’s professional tipsters had advised their clients to expect a number close to 150,000. They assumed that the end of the third wave of COVID-19 infections would bring another out of the ordinary reading. (The economy created more than 230,000 jobs in June.) It was a pretty big mistake, so the headline number was actually a disappointment for some people.

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The potential for bias from frontline data is why Governor of the Bank of Canada Tiff macklemsaying you will be looking at more indicators than usual to get an idea of ​​where the economy is heading. Statistics Canada reported that the unemployment rate fell to 7.5 percent last month from 7.8 percent in June. Pre-COVID, that would have been a good indicator to assess the trajectory of interest rate policy. But these days Macklem cares at least as much about the employment rate, which measures the percentage of the entire population that is employed. That number jumped to 60.3 percent from 60.1 percent the previous month, but was still well below its pre-pandemic level of about 62 percent.

Macklem is also watching the “underutilization rate, “What Statistics Canada calculates by combining the number of job seekers with its count of people working less than half their normal hours”; who say they would like to work but have stopped looking; and who are temporarily fired. That figure dropped to 14.4 percent in July, the lowest since the pandemic began. Unfortunately, the underutilization rate was only 11.4% in February 2020. We are still a long way from home.

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Statistics Canada had 18.9 million workers in July, 246,400 less than in February 2020.

But the Bank of Canada recognizes that the real gap is wider than that. Macklem said in July that, adjusted for population growth, the economy would need to create another 550,000 jobs, more than was generated in all of 2019, before being satisfied that the recovery was complete. That suggests that the central bank intends to keep a lot of stimulus in the system at least until employment rises to 19.3 million, which is 2.1 percent higher than the current level.

But Macklem’s definition of recovery is more complex than that. The governor has repeatedly expressed his wish that everyone return to where they were before the pandemic. That is why you are digging deeper than the headline numbers.

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One of the metrics the central bank is looking at is youth unemployment. The table below shows the rate of change in employment for young men, young women, and older workers since the start of the pandemic. Young men have reached the majority of the workforce, but young women continue to feel the brunt of the COVID-19 crisis.

Leah Nord from the Canadian Chamber of Commercetold Bianca Bharti of the Financial Post He is concerned that hiring slowed in July because employees left industries such as hospitality and tourism during the shutdown. Brendon Bernard, an economist at Indeed, a digital recruiting platform, tweeted that a large drop in temporary employment suggests that the “quick wins” may be over. In other words, the remaining escalation to pre-pandemic conditions could be more difficult than it sounds.

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Here is one of our favorite graphics. It tracks the rate of change in employment across four pay brackets and shows that top earners have had a pretty good crunch, while those earning less than $ 20 an hour continue to languish. The graphic is a snapshot of how the pandemic has exacerbated wealth inequality and a graphic demonstration of why policymakers are putting economic growth ahead of inflation concerns.

Babysitting is coming

Prime Minister Justin Trudeau and Prime Minister of Quebec François Legault Announced on August 5 they had agreed to an unconditional transfer of $ 6 billion over five years to Quebec City from Ottawa under the auspices of Trudeau’s $ 30 billion effort to cajole provinces and territories into providing child care. for $ 10 per day. Six provinces have signed up since Finance Minister Chyrstia Freeland announced the program in her April budget.

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The redoubts: Alberta, Saskatchewan, Manitoba, the Northwest Territories, Nunavut, Ontario and New Brunswick. There are many conservative governments in that group, so it is possible that the policy would get in the way of a program that would increase labor participation rates, raise wages for early childhood educators, fuel construction by expanding spaces. nursery school and strengthen the odds. that children are properly stimulated in perhaps the most important stage of human development.

Rebecca Schulz, Alberta’s Minister of Children’s Services, grumbling that his province had asked for the deal that Quebec got and was denied. The difference, of course, is that Quebec has offered heavily subsidized child care since the late 1990s and parents there already pay less than Trudeau’s goal of $ 10 a day. Alberta does not have such a system, and its shaky politics provides little confidence that its leaders can be trusted to make a large transfer as Parliament intended when it passed the budget bill.

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There are reasons to think that part of the political opposition is performative. Millions of voters who were forced to work from home during the pandemic while also caring for their children now see daycare as an economic infrastructure just as important as roads and ports. The evidence that affordable child care strengthens the economy is also indisputable. As the chart below shows, Quebec was lagging behind when it introduced its program 25 years ago. Its participation rates are now the highest in the country. The overall economy will be stronger in the coming years as more provinces are trying to catch up.

Export import

Exports are still a tailwind. Statistics Canada reported On August 5, companies shipped $ 53.8 billion worth of goods in June, the largest amount ever recorded. Much of that is the result of rising commodity prices, but the companies that make the windfall profits don’t care, and neither does the macroeconomics: it’s all money coming out of the pockets of foreigners that can be used. to build Canada. can.

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Hopefully, exporters are taking advantage of their good fortune to invest in their companies, so that they are in a position to take even more advantage of the opportunities in the future. Business investment has disappointed for years, as the collapse of the oil and gas industry revealed how little other industries were spending to increase their productivity.

A substitute for business investment is imports of industrial machinery and equipment because much of the state-of-the-art technology needed to power a modern factory is manufactured abroad. Imports of such things rose to $ 16.9 billion in the second quarter, a 2.5 percent increase from the previous quarter and the largest since the third quarter of 2019. If history is any guide, business investment will follow.

• Email: kcarmichael@postmedia.com | Twitter: carmichaelkevin

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In-depth reports on the economics of innovation from The Logic, presented in association with the Financial Post.

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