Unemployment remains elevated in December.

January 9, 2010

Yesterday unemployment data was released by various bureaus of statistics in Canada, the U.S. and Europe. The results while not surprising were nevertheless somewhat disappointing. Instead of a small but significant rise in employment as befits the beginnings of a recovery results were less encouraging. In the U.S. there were a total of 85,000 more job losses . Unemployment remained stable at 10.0 % but only because some 661,000 left the job market and became discouraged workers who had given up looking for work. Had they remained the unemployment rate would have risen to 10.4 %. The broader definition of unemployment that includes discouraged workers and marginally attached workers now stands at 17. 3 % in December up from 17.2 % the month previous.The U.S has now lost 7.2 million jobs since the recession began. The rate of monthly job losses is now a small fraction of what it was at the height of the recession but the net total is still negative. This has to be reversed in the coming months if the recovery is to bear positive fruit for people.
It is time that employers began to hire more workers, that governments spend the stimulus monies that are available to them and that innovative employment generating programs including tax incentives for hiring and to avoid lay-offs are added to the mix of policy options. Combining employment insurance benefits with reduced working time to prevent layoffs is a good temporary idea that has worked well in the past in a number of countries.

In Canada results were also disappointing as the unemployment rate stalled at 8.5 % (8.4 % in Quebec, 9.3 % in Ontario and 6.7% in Alberta which incidentally has the highest labour participation rate in the country at 73.8 % versus only 67 % in Ontario and even less in Quebec. Total employment now stands 323,000 below its October 2008 peak. Any talk of the central bank raising interest rates should be put on the back burner until evidence is firmly established that unemployment rates are dropping below 6 %. and that inflation above 3 % is beginning to appear. We have a way to go before this occurs.

In Europe joblessness rose by 102,000 in the euro-zone countries to bring the total of jobs lost to about 4 million. Unemployment remained elevated, although Germany has recently experienced a small drop in its rate.The unemployment rate for the Euro zone 16 is 10 % for November while the European area 27 countries rate is 9.5 % up from 9.4 5 the previous month October 2009.there are now 15.7 million unemployed in the eurozone and 22.9 million unemployed in the European 27 countries area.Unemployment has risen by 4.97 million in the EA 27 since the start of the recession in 2008. Unemployment is 7.9 % in the U.K., 10 % in France and 7.6 % in Germany. It is 5.2 % in Japan.

So although I have not changed my view that a double dip recession is unlikely it is clear that now is not the time to withdraw stimulus or focus on deficit reduction. The global economy is still in a fragile if improving state.Governments should be certain to ensure that their stimulus programs are being implemented on the ground where it counts.Words are not enough.