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Unemployment Rate Unlikely to Drop

6 August 2012

During all the “Toronto bubble” talk, experts and analysts from around the country weighed in on the subject and many of them kept reiterating the same points – the bubble will mean little to us if employment drops and people soon find themselves out of work. Now, despite pushing out pretty low unemployment rates, and a mad rush of hiring at the beginning of the year, it looks as though the unemployment concern is a real one here at home – and one that could be sticking around for a little while.

Over the course of the past year Canada has added a total 181,000 jobs; and since January 26,000 a month. Looking at the chart below, it’s easy to see just what a positive impact that had in our country, as in the months following it, our unemployment rate started to go down.

Combine this data with our low interest rate, and you might be tempted to say that our economy is booming. But looks can sometimes be deceiving. While the addition of those new jobs certainly puts more people back to work and able to meet their household expenses (such as those Toronto mortgages that may or may not be in a bubble,) they’re in vulnerable sectors. Areas that are highly susceptible to change, adn to the global business cycle. Add in the fact that that cycle isn’t doing very well right now in most parts of the world, and Canada’s unemployment rate could go back up to the 7.3 per cent, the number where it sat one year ago today.

The global economy is a hugely contributing factor to our unemployment rate here at home, and it’s one of the reasons why Canadian unemployment has remained stagnant instead of decreasing, even despite that overwhelming number of jobs that have been created since January. The pace of growth in the American economy went down to 1.5 per cent in the second quarter of this year, a huge contributing factor to our own unemployment, as they are our biggest export market. Add in the recession occurring in Europe, and there’s not going to be a lot of business coming from there either.

But there’s one group of Canadians that job losses will hit the hardest; and actually, have been hit the hardest, even in the early months of 2012 when it seemed everyone was hiring – those are our young people. Again taking a look at the chart below, you can see just how many young people in our country are unemployed, and how many have been unemployed over the course of the past year.

While those previously mentioned 181,000 jobs have been being created over the past year, it seems not a lot of them were for Canadians between the ages of 15 and 24. Over the same period of time, July 2011 until July 2012, young Canadians lost 43,000 jobs, sending the youth unemployment rate up to a whopping 14.8 per cent.

But things might not be all bad.

The Bank of Canada published their Business Outlook Survey last month (which you can view here), and in it was information stating that 59 per cent of businesses in Canada plan on hiring within the next year; while only 6 per cent said that they would be letting people go. Of all the businesses to say that they would be hiring, small and medium-sized businesses were the most likely to.

And say some experts, we shouldn’t get too bogged down by a slight decrease in the numbers.

“If we can hold to something like 15,000 jobs a month, that’s reasonable,” says Avery Shenfeld, chief economist at CIBC World Markets. “If Canada were an island unto itself we might be quite disappointed by that. But given what’s happening in the rest of the world, we’ll be counting our blessings that it isn’t worse.”

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