Economists, Comment Please: Comparative Unemployment Rates

[Malthus]

Canada's unemployment rate just dropped from 8.7% to 8.4%

http://www.theglobeandmail.com/globe-investor/strong-jobs-data-drives-loonie/article1318407/

While at the same time, the US rate hit a 26 year high of 9.8%:

http://www.ft.com/cms/s/0/617cc13c-af49-11de-ba1c-00144feabdc0.html?nclick_check=1

The amazing thing about this is that the unemployment rates for the two countries were identical in the early '80s at 7.6%. Since then, the rates have diverged, with the US consistently having a better (lower) rate. This gap has been getting smaller - it fell to a 2 percentage point gap in 2002. Only recently though, has the unemployment gap been turned on its head, with Canada outpacing the US in job creation/retention.

This is even more startling when one realizes that part of the reason for the gap in the first place is that the US measures unemployment differently, which has resulted in the Canadian rate being 1% lower if measured using the same US concepts:

http://findarticles.com/p/articles/mi_m1153/is_6_123/ai_65159958/?tag=content;col1

This would mean that the current rates (measured in US concepts) are;

US 9.8%
Canada 7.4%

What is causing this apparent discrepancy? Is this going to be maintained?

[MadImmortalMan]

Rising commodity prices.

[PRC]

Rising commodity prices.

Natural gas is spiralling downwards and oil is down as well, no?

[CountDeMoney]

What is causing this apparent discrepancy?

The US economy, in raw numbers, is much more consumer-based than Soviet Canuckistan.  People have less money to spend, consumer-based businesses and industry contract, jobs get lost.

[PRC]

The US economy, in raw numbers, is much more consumer-based than Soviet Canuckistan.  People have less money to spend, consumer-based businesses and industry contract, jobs get lost.

There isn't much of a difference in the consumer culture between the two countries. 

[CountDeMoney]

The US economy, in raw numbers, is much more consumer-based than Soviet Canuckistan.  People have less money to spend, consumer-based businesses and industry contract, jobs get lost.

There isn't much of a difference in the consumer culture between the two countries.

We're bigger, and spend more.  And have more Best Buys, along with more negros with shittier credit.

[MadImmortalMan]

Rising commodity prices.

Natural gas is spiralling downwards and oil is down as well, no?

Yes, especially in the short term. Metals are up.

[alfred russel]

Doesn't seem suprising to me: the recession hit the US harder than Canada. More GDP shrinkage = more unemployment. Someone might argue that is compounded by more lax hire and fire laws in the US, but I'm not sure about that.

[Admiral Yi]

No one knows.  The media is full of stories about the "jobless recovery."  So your downturn wasn't as severe, and your recovery is acting more like a normal recovery.

[Barrister]

Rising commodity prices.

Natural gas is spiralling downwards and oil is down as well, no?

I don't believe that is correct.

Oil price:



Gas price:



Bah - my graphs don't work.

But basically they show both prices skyrocketing up to last summer, nosediving through to last winter, then a slow rise since then.

[dps]

Obviously, it's Obama's fault.

Seriously, while I think that the bailout and stimulus plans we have put in effect have actually made the situation worse, those aren't really Obama's ideas--indeed, they were largely in place before he took office.

[The Minsky Moment]

1) Canada did not suffer as greatly from the economic events of the past few years as the US.  The financial system was operating on a sounder basis and the losses were not as devastating.  Also as a commodity heavy economy, Canada has benefitted from continuing strength in commodity prices; a similar dynamic has boosted Australia.

2)  You have to keep in mind that coming up with economic aggregates like unemployment rates is a bit akin to making sausages, statistically speaking.  Even if you try to adjust for methodology it is hard to come up with a meaningful comparison within the kind of precision you are talking about (1-3%).

[Malthus]

1) Canada did not suffer as greatly from the economic events of the past few years as the US.  The financial system was operating on a sounder basis and the losses were not as devastating.  Also as a commodity heavy economy, Canada has benefitted from continuing strength in commodity prices; a similar dynamic has boosted Australia.

2)  You have to keep in mind that coming up with economic aggregates like unemployment rates is a bit akin to making sausages, statistically speaking.  Even if you try to adjust for methodology it is hard to come up with a meaningful comparison within the kind of precision you are talking about (1-3%).

As to the point #1 - I see all sorts of evidence (anecdotal at least) that the recession did not bite as heavily hereabouts. For one, business was slow for months in general and some got laid off, but it appears now to be picking up all over the place; for another, the housing market remained strong - prices stagnated for a few months but there are now bidding wars again.

[DGuller]

Could productivity growth also be in play?  In the long run lower productivity shouldn't lead to lower unemployment, but in the short term growth in productivity can extend the period of jobless recovery (or at least that's my understanding of it).

[The Minsky Moment]

The initial reaction to this kind of downturn is aggressive cost cutting, which we have seen.  Where costs are being cut faster than revenue growth rebounds, that typically is going to show up as a productivity increase.