The following table is based on historical data from Statistics Canada, it shows the tight coupling of US and Canada unemployment rates, with the Canadian rates generally lagging the US. The Canadian unemployment rates have been historically higher then the US by anywhere up to 4%:
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The current unemployment numbers for the US and Canada are as follows:
- United States Department of Labor states the current unemployment rate as 8.1% as of February 2009. States with double digit employment in January 2009 were reported as: California 10.1%, Michigan 11.16%, Rhode Island 10.3%, South Carolina 10.4%.
US Department of Labor, Feb 6, 2009 - Unemployment Rate
- Statistics Canada states the current unemployment rate as 7.7% as of February 2009, with Ontario at 8.7% unemployment
Statistics Canada, March 13 2009 - Unemployment Rate
The historically tight coupling of the US and Canada unemployment rates mean that US forecasts can be reasonably used as a proxy for future Canadian unemployment rates. Some sources and their forecasts for the 2009 US unemployment rate follow:
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Bank of Montreal is forecasting a US unemployment rate of 9.3% in 4Q09.
Royal Bank of Canada is forecasting a US unemployment rate of 8.8% in 4Q09.
Based on the current forecast US unemployment rates and past trends, I expect the Canadian unemployment rate to rise to over 10% and potentially over 14% nationally by 4Q09. (NOTE: Toronto Dominion bank’s March forecasts expect Canadian unemployment to reach 9.9% by 4Q09.)
The coupling of the Canada and US unemployment rates is interesting in many ways. In particular, there are academic papers that examine the question of Canadian government policy - specifically, can Canadian policy have any significant impact on Canadian unemployment numbers due to the tight coupling of our economy to that of the US?
My sense is our government, in general, has little hope of stopping Canadian unemployment rates from following that of the US. I believe that from a practical perspective, all our government can reasonably do is moderate the impact of the unemployment growth with special social and employment programs; and sustain our economy and workforce until the US economy recovers by driving infrastructure and entrepreneurial economic development programs.
In order to break the cycle, the Canadian government should be actively working to diversify our economy by aggressively fostering new small business development and developing export relationships and associated selling channels with other countries outside of the US.
Some interesting articles and papers on the US and Canada unemployment numbers include the following:
A factor that can have a big impact on the rate of unemployment growth is what protectionist actions are taken by Canada, the US and others. It is almost inevitable that if the recession continues to deepen — politicians will find protectionism as one of the last tools in their basket of options to try. Already the politicians are dancing around this topic – some articles on this topic are below:
February 13, 2009
