The unemployment rate represents the unutilized supply of labour in the economy. It is considered an indicator of economic health.
Persistent joblessness is associated with a great deal of public hardship. Because of this, politicians are under considerable pressure to maintain a low unemployment rate. Although you wouldn’t know it by their foolish economic policies – including but not limited to: high taxes, spending and borrowing, inflation, excessive regulation, protectionism, price controls, land collectivization and outright corruption – it could be said that politicians’ jobs depend on it.
But, as we’ve seen before, pols don’t let economic ignorance or data stand in the way of re-election. This applies to the unemployment rate as well.
In Canada, labour market data is collected by Statistics Canada using the Labour Force Survey. It includes all Canadians over age 15 and classifies them into one of three categories:
- Not in the Labour Force
Not so fast. The unemployment rate decreased because fewer people were searching for work. As such, more people were classified as not in the labour force instead of unemployed, resulting in a decrease in the unemployment rate:
A declineÂ in the number of people searching for work pushedÂ the unemployment rate down 0.2 percentage pointsÂ to 7.4%.
In his excellent book Liberty Defined:50 Essential Issues That Affect Our Freedom, Ron Paul described this situation as follows:
Government unemployment statistics are virtually worthless in describing the seriousness of the economic downturn. The most astounding deception is that if a discouraged individual quits looking for work, he or she is no longer listed as unemployed. When a significant number cease to list themselves as seeking employment, the percentage of unemployment can actually go down.
Using data from the Labour Force Survey, if you incorporate discouraged searchers, those individuals who are waiting for work starting in more than four weeks, and involuntary part-time workers, the unemployment rate jumps to 11.4%.
That’s a whopping 54% increase compared to the “official” unemployment rate. Imagine the fuss if this was revealed to the public. The government would panic. I can picture it now:
Citizens, there is a crisis of unemployment. But fear not: your government has devised a plan to finally rid this jobless scourge, once and for all: we hereby declare… conscription!
On second thought, maybe we can leave the unemployment rate where it is.