Economy Lab

Cry to 'do something' about jobs not based on evidence

Special to The Globe and Mail

the hiring rate in Canada fell significantly in 2009, but returned to trend in 2010. (Ryan Remiorz/Ryan Remiorz/The Canadian Press)

Calls for the federal government to ‘do something’ about job creation are presumably based on some sort of evidence, but I can’t figure out what it might be.

Job creation is certainly an issue in the U.S.; hiring rates are still some 20 per cent below pre-recession levels. The only reason why U.S. employment isn’t still falling is that quit rates fell: U.S. workers are holding on to jobs that they might have otherwise left if given the opportunity.

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But it doesn’t make much sense for Canada to ‘do something’ about job creation because of problems in the U.S. labour market. Why would anyone look at U.S. data and go on to infer that the rate of job creation in Canada requires a policy response?

We don’t know as much about the Canadian labour market as we should. Statistics Canada’s Labour Force Survey provides data for the number of people who are employed and unemployed in a given month. But our understanding of the state of the labour market would be improved if we also had information on the flows into and out of employment; as noted here, the size of the gross flows are one or two orders of magnitude greater than the net flows that make the headlines. There is no Canadian counterpart to the U.S. Job Openings and Labor Turnover Survey (JOLTS).

The best proxy I’ve been able to find for the hiring rate is the number of workers who have been at their current jobs for less than three months. Movements in the number of people hired should show up here, albeit with a certain lag. As far as I can make out -- see here for more detail -- the hiring rate fell significantly in 2009, but returned to trend in 2010. The data from 2011 are consistent with those of the boom years of 2005-2007.

Calling for the government to ‘do something’ about job creation when hiring rates are already at pre-recession levels is puzzling. At best, it is a demand that the government undertake busy work: activities that achieve little beyond demonstrating that it is ‘doing something’. And judging from the response, it is also a demand that the government is happy to meet.

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