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Canada’s unemployment rate will likely double to 10%, and that’s an understatement

Summary:
Normally, I don’t venture into to predicting month-to-month changes in the unemployment rate, but this month is an exception for two reasons. The changes are certainly going to go well beyond the statistical noise inherent in the Statistics Canada survey, so there is no chance that the picture will be clouded. And history really isn’t a guide to what is coming next (in the very short term), so sophisticated models based on past data don’t have a particular advantage. My bets are on an almost doubling of the Canadian unemployment rate between February and March, with even this being an understatement because the official survey preceded some of the more dramatic shutdowns that happened later in the month. I’m suggesting that we are even probably close to 15% right now. Only weeks

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Normally, I don’t venture into to predicting month-to-month changes in the unemployment rate, but this month is an exception for two reasons. The changes are certainly going to go well beyond the statistical noise inherent in the Statistics Canada survey, so there is no chance that the picture will be clouded. And history really isn’t a guide to what is coming next (in the very short term), so sophisticated models based on past data don’t have a particular advantage. My bets are on an almost doubling of the Canadian unemployment rate between February and March, with even this being an understatement because the official survey preceded some of the more dramatic shutdowns that happened later in the month. I’m suggesting that we are even probably close to 15% right now.

Only weeks ago a tightly packaged bundle of RNA floated across the seas on a droplet of air and pushed a two trillion dollar economy over a cliff.

This coming Thursday, Statistics Canada will release its first comprehensive assessment of the economic fallout, documenting the job and unemployment totals for March. As electrifying as these statistics are certain to be, they will be less than perfectly clarifying.

Last week journalists clamoured hard for clear information on the projected number of COVID19 cases and deaths, data at the very heart of decision making, and the right of every Canadian to know.

The Federal government hesitated to release health projections, but there will be no hesitancy, no caveats, and no concerns about accuracy after the statisticians in Ottawa press the release button at 8:30am on Thursday, and report on what will surely be an unprecedented collapse in employment and a strikingly longer line of unemployed.

Yet we should also treat these numbers as provisional, even for a survey that is reliably conducted every month and tallied up in only a couple of weeks. Official statistics just can’t move as fast as the events we are now living through.

The economy was pushed over a cliff, we all know that from seeing our lives, and the lives of our families and friends, play out in real time.

Thursday morning’s data will only give a snapshot captured at one point early on, not a movie of what happened and what is now happening, never mind a clear sense of what things might look like after the economy hits rock bottom and the dust has settled.

The jobs and unemployment numbers will refer to one particular week in March, from Sunday the 15th to Saturday the 21st.

Similar American data released last Friday were anchored even earlier in the month, leading observers to clearly warn that the jump in the unemployment rate, even if it was the largest on record since 1975, understated the economic damage of COVID19.

The Canadian data will be better timed, but they will nonetheless only capture the initial impact of COVID19, during a week in which international travel was restricted and the seriousness of the situation started to hit home, but before many schools closed and non-essential work was shut down in most provinces.

The jobs situation certainly deteriorated, but it probably deteriorated even more during the two weeks after Statistics Canada asked its survey questions.

On March 20ththe Globe and Mail reported that half a million Canadians had applied for Employment Insurance in the previous four days, but by the end of the month the cumulative estimate of Employment Insurance applicants was put by some at more than two million.

Statistics Canada defines unemployment according to how Canadians behave: are they looking for a job, are they waiting to start a job, or are they on a temporary lay off and expecting to return to their job in the near future?

So whether or not you collect Employment Insurance is a whole other thing, but this time round almost all new claimants will certainly find themselves classified as unemployed, most of them considered to be on a temporary layoff.

On this basis alone the number of unemployed has likely boomed from 1.1 million in February to about 1.7 million. The survey is well timed to capture the freeze in hiring that always precedes layoffs, so the ranks of the unemployed have swelled by at least a further 200,000, the number normally starting a job in any given month but who now are out of luck.

So look for the number of unemployed Canadians to jump to around two million, putting the unemployment rate at about 10%, dramatically higher than February’s 5.6%.

But a good deal has already happened since the second week of March, and it is likely that the unemployment rate right now is around 15%, one in seven Canadians.

It is not a pretty picture, and we don’t need Statistics Canada to tell us that. Still numbers, real numbers, what statisticians tell us are facts, will help focus the public imagination on the economic fallout of this health crisis.

But however accurate these numbers are, what Canadians really need to know is how long the descent will last, and when we will be able to stand up, dust ourselves off, and start again. On Thursday morning Statistics Canada, I’m afraid, will tell us nothing at all about how long this economic disaster will last.

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