Ontario unemployment numbers—the devil’s in the details

According to recent Statistics Canada’s labour force numbers, Ontario—including its major urban areas—are experiencing low and declining unemployment rates. In 2009, after the recession hit, the average annual monthly unemployment rate in Ontario peaked at about 9 per cent but has dropped now to just under 6 per cent—the lowest it has been since 2001.

This happy outcome is apparent in cities across the province. In 2009, average monthly unemployment rates ranged from a high of nearly 14 per cent in Windsor to a low of approximately 6 per cent in Ottawa. By 2018, unemployment rates ranged from a high of 6.6 per cent in St. Catharines-Niagara to 4.2 per cent in Guelph. Some of the most impressive results were in areas of the province devasted by 21st century manufacturing job losses. Windsor, for example, saw its unemployment rate drop from 14 per cent in 2009 to 6 per cent by 2018. London went from 10 per cent to under 6 per cent. And Hamilton went from 8 per cent to an eye-opening seasonally-adjusted 3.7 per cent in February 2019.

But not so fast. The caution here lies in the trends in the component parts of these statistics—namely the labour force, employment levels and employment and participation rates. So here is the thing. Unemployment rates can go down if more people are employed—all other things given. Yet unemployment rates can also go down if employment stays the same but the labour force shrinks because employable working age people have decided to withdraw from actively seeking work. In the case of Ontario, there has been a decline in participation rates and employment rates. That is, a smaller share of the working age population is in the labour force and correspondingly a smaller share of the same working age population is employed.

In 2008, Ontario’s annual average monthly seasonally-adjusted labour force participation rate was 67.7 per cent, but by 2018 it was down to 64.5 per cent. The employment rate in 2008 was 63.3 per cent, but by 2018 it was down to 61.0 per cent. Similar patterns are evident for many Ontario cities. Dynamic Toronto, for example, saw its labour force participation rate fall from 68.7 per cent to 65.9 per cent, and the employment rate fall from 64 per cent to 61.9 per cent, between 2008 to 2018. Over the same period, Windsor’s labour participation rate dropped from 63.8 per cent to 60.1 per cent and its employment rate fall from 58.0 per cent to 56.6 per cent.

Indeed, some of the cities boasting the lowest unemployment rates—or some of the biggest improvements in their unemployment rates—are also seeing the lowest employment rates. In 2018, across 15 major Ontario centres, the employment rates were the highest in Kitchener-Cambridge-Waterloo (66 per cent) followed by Guelph (65.6 per cent) and Oshawa (65 per cent). At the bottom, we find Windsor (56.6 per cent), St. Catharines-Niagara (57.1 per cent), Greater Sudbury (57.5 percent) and London (57.7 per cent). Toronto was seventh on the list of employment rates (61.9 per cent)—just ahead of Thunder Bay (60.7 per cent).

Unemployment rates are low partly because of declines in participation rates as people withdraw from the labour force. It’s not all because of an aging population or early retirements either. Participation rates have actually been growing in the population over age 55 but have declined among younger workers. This may be an after-effect of the 2009 recession on entry-level positions and young cohorts entering the labour market since that time.

Based on employment rates and the attraction of workers into the labour force, the Ontario economy is still not out of the woods. Future economic growth requires capital investment and growing labour force participation and employment. Ensuring that Ontario becomes more competitive and attractive to investment is all the more important because only growing economic opportunity will entice workers back into the labour force.