From: sitomlin@cantor.math.uwaterloo.ca (Stephen I. Tomlinson)
Subject: 500 New Jobs Per Day
Keywords: recession, jobs
Organization: University of Waterloo
Date: Mon, 11 Jan 1993 21:27:23 GMT

Statistics Canada reports that Canada's seasonally adjusted employment 
rose by 102,000 jobs in the last five months of 1992.  That's a pace
exceeding 500 new jobs per day.

Strangely, I only remember hearing about job losses in the news
during the fall, but I guess I just wasn't listening closely enough. ;-)

Average employment was 12.2 million in 1992, down from its peak of
12.6 million in 1990.  Hopefully, we'll recover all of those jobs
and create many more in the years to come.

After all, employment fell from 11.0 million in 1981 to 10.6 million 
in 1982, more than 1000 jobs lost per day.  Employment rose only to
10.7 million in 1983, but then took off at a pace exceeding 700 new jobs 
per day for 6 years.  We look to be approaching that pace again.

History suggests that, even if we have a lot of job creation in the
next year, the unemployment rate (11.5% at last report), won't fall
much, and may even increase.  Why?  Because 'discouraged' workers who
had given up looking for work during the recession are not counted 
among the unemployed.  When they hear that employment is rising again, 
they will re-enter the labour force, driving up the unemployment rate.
This happened after 1982; employment was higher in 1983 than 1982,
but the unemployment rate was also higher (11.8% vs 11.0%), because
of a surge in re-entrants to the labour force.

So the moral is, for the next while, pay more attention to the actual job
count than the unemployment rate if you want to know if the job picture
is improving.

The best news of all is that there are lots of reasons to believe that 
unlike the last two job booms, which ended in painful busts (1981-82 and 
1990-91), this economic renewal should be steadier and more sustainable:

 * The past 2 recessions (1981-82, 1990-91) were each mostly the result 
   of the Bank of Canada increasing interest rates, intentionally to slow 
   down the economy, to reduce accelerating inflation.  This recovery has 
   its inflation at the levels of the 1950's and early 60's, when 
   recessions were so modest that employment still rose during them
   (just slower than normal).  And the Bank of Canada has earned an
   anti-inflation reputation that should enable it to maintain price
   stability without having to tighten monetary policy so much again.

 * The productivity of workers has been rising faster during the past
   few years than it has in the past two decades, and companies are
   vocally emphasizing their renewed emphasis on productivity.  This 
   renewed emphasis has more benefit than a faster rising standard of 
   living.  If companies aren't emphasizing productivity, perhaps because 
   increasing profits is easy by pushing through price increases in an 
   inflationary environment, then workers are vulnerable to lay-offs later
   when companies tighten up.  Many economists cite lack of emphasis on
   productivity as an important factor in the severity of the past two 
   recessions.  This new recovery is happening with companies emphasizing 
   productivity; in the short run, that may mean (indeed, probably has 
   already meant) slower job growth, but in the long run, it means workers 
   are less vulnerable to future lay offs. 
   
 * When Canada recovered from the 1981-82 recession, the federal deficit
   was more than 8% of GDP, making an increase in the debt-to-GDP ratio
   inevitable, and hence higher taxes inevitable.  In the new recovery,
   the federal deficit is only 5% of GDP, and all forecasters expect
   the debt-to-GDP ratio to fall, so higher taxes are not inevitable
   at the federal level.  The provinces collectively are in a better
   debt position today than the federal government was at the end of
   the 1981-82 recession, so the provincial debt-to-GDP ratio should
   be falling within a few years too.

 * Some people believe that some of the job losses from 1990-91 have
   been because of freer trade (personally, this looks off-base to me,
   since Canada had the highest job creation rate of any OECD country
   from 1961-90, a period during which the average tariff fell from
   about 9% to less than 4%).  Nevertheless, this new job creation
   is coming with Canada's lowest trade barriers in modern times, so there
   are few jobs remaining that are vulnerable to more tariff decreases.
   Also, Canada increasingly has guaranteed access to growing foreign 
   markets, extremely important to this country, whose citizens' standard
   of living is so dependent on specializing and trading globally.

Reasons for cynicism are often given.  For example, Canada's
constitutional uncertainty remains.  However, Canada has had one of the
highest rates of job creation in the world despite such ongoing 
uncertainty.  Also, as has been pointed out from time to time, Canada's 
governments aren't perfect.  In fact, sometimes Canada's governments do 
downright stupid things, and everyone is sure these governments will do 
more stupid things.  But again, Canada has had one of the highest rates 
of job creation in the world in the face of government stupidity before.

Steadily rising employment together with a faster rising standard of living,
without the certain price of severe busts to come.  This is what our
federal government and central bank have said they have been putting us
through the wringer for.  Let's hope that the 5-month trend of 500 new
jobs per day really signals the beginning of a new prosperity era.

-Stephen
Xref: sparky soc.culture.canada:9847 can.politics:11297