Why the Unemployment Rate is No Longer a Reliable Gauge of Labour Market Performance /

Given the falling rates of labour market participation, it is increasingly clear that the But since peaking in 2008, the labour force employment rate rather than the unemploy- participation rate has declined from 67.6 per- ment rate is a better barometer of the state of cent to 65.7 percent. [...] The unemployment rate is becoming less helpful as an overall indica- is the share of people actively looking for work tor of the state of the country’s labour market, that were unable to secure employment rela- or even regional and provincial markets, it is tive to the total labour force. [...] As this essay First, the population in question is not the total will explain, changes in the labour force have population, but the number of persons of work- reduced the relevance of the unemployment ing age, 15 years and over, in Canada during the rate as a gauge for the health of the overall la- reference period.4 bour market and continuing to rely on the un- The labour force is the number of c [...] In other words, the This bulletin aims to explain why the employ- labour force is the sum of those deemed em- ment rate rather than the unemployment rate is ployed and unemployed during the reference a better single measure of labour market per- period (normally a week). [...] Figure 3 shows both the absolute both measures—employment and unemploy- growth in the labour force and the percentage ment—told the same story about labour market of Canadians participating in the labour force.