Unemployment hurts, but it's not a crisis yet

Don Pittis, senior producer of CBC News Business. The spouse of a close friend who works with us at CBC News Business was laid off the other day. Hard as it was for that family, it was a salutary lesson for those of us who report on layoffs nearly every day. It reminded us that unemployment is people, not just numbers.

In the current climate, we are becoming desensitized. Company job cuts have become so common in the last few months that generally we only report the ones where thousands of people have been tossed out of work at the same time.

A report from a firm that helps companies fire staff says that in the United States there have been more than a million job cuts announced already this year. And that doesn't include December, the biggest layoff month of the year.

Unemployment is like a car accident. Until it happens to you, or those close to you, it's hard to take seriously.

That's why a young man in a CBC radio report this week was so convinced Canada was not in trouble. He had a good job in Estevan, Sask., helping to bring the world some of the cheapest-to-pump, cheapest-to-refine oil left in North America.

And in many ways, the young man in Estevan had it right. There are few better indicators of how well an economy is faring than unemployment.

As an economic indicator, the latest unemployment numbers of 6.3 per cent for November tell us that despite all the gnashing of teeth over "the worst economic crisis since the Great Depression," we are nowhere near full-blown hard times in this country. The U.S. may be starting to get a taste of it, but not here.

'Even if our jobless numbers remain relatively low, hearing about other people losing their jobs can help make things worse.'

And here is the difficult thing about looking at joblessness as an economic indicator. You have to separate your mind for a few minutes from the individual pain of out-of-work people. Individually, not having a job hurts. But statistically, there are always out-of-work people.

What economists call the "natural rate of unemployment" is the background level of joblessness that is always with us. The idea is that at any moment, in an active economy, some people are always "between jobs." At any moment, some companies are firing while some are hiring.

OECD predicts Canada will lose another 200,000 jobs

Most of us have been between jobs at some time in our life. As someone who traveled the world based on where my wife was getting her next degree, I've contributed to the natural rate of unemployment, repeatedly and in different countries.

In Canada, the natural rate of unemployment can be estimated in many different ways, but it must be somewhere around 6 per cent or 7 per cent. After all, unemployment in Canada has only dipped below 6 per cent twice in the last 30 years. In the 1980s and again in the 1990s, it spiked closer to 12 per cent.

But even if our jobless numbers remain relatively low, hearing about other people losing their jobs can help make things worse. People refuse to leave jobs to seek new ones, seizing up the job market. People worried about their jobs save more or pay down debt. They are less likely to re-circulate their money into the economy by spending.

With luck the global recession will be over by spring. But it may not be. Unfortunately, unemployment has a habit of creeping up over a period of months or years before it turns down again.

Even the rich countries' think tank, the Organization for Economic Co-operation and Development (OECD), says the global economic tsunami will hit Canadian unemployment eventually. Its latest report says Canadian unemployment will rise by about a percentage point, some 200,000 more people facing the pain of job losses.

But if the most dire predictions about the world economy come true, we ain't seen nothin' yet.

In the depths of the Great Depression, in 1933, about one in four North Americans were out of work. That's 25 per cent unemployment. Even by 1938, that had only improved to one in five. That's completely different from the kind of unemployment where you lose a job and find a new one in a few months. In many families, the main single breadwinners were out of work for years.

The strange thing is that even during the worst of those hard times, 75 per cent of the workforce was still bringing in a paycheque. If you had a paycheque, you were well off. That's why family stories of the Great Depression are so different. But that didn't mean you felt safe.

As Canadian-born economist John Kenneth Galbraith said in his book The Great Crash, widespread unemployment spreads a pall over everyone.

"Some people were hungry in 1930 and 1931 and 1932. Others were tortured by the fear that they might go hungry," he wrote. "Yet others suffered the agony of the descent from the honour and respectability that go with income into poverty. And still others feared that they would be next."

However we do it, and whether it's the Tories or the Liberal-NDP coalition, figuring out how to prevent a serious increase in unemployment is worth a lot of effort.

Don Pittis has reported on business for Radio Hong Kong, the BBC and the CBC. He is currently senior producer of CBC News Business.