labour force surveylabour force surveylabour force surveylabour force surveyandand

THE COMPOSITE THE COMPOSITE LEADING INDICATORLEADING INDICATOR

THE COMPOSITE THE COMPOSITE LEADING INDICATORLEADING INDICATOR

What?What?

The most timely and important measure of employment/unemployment levels

The most timely and important measure of employment/unemployment levels

Main objectiveMain objective

to divide working-age population into three groups:to divide working-age population into three groups:

employedemployed unemployedunemployed not in the labour forcenot in the labour force

and provide descriptive and explanatory data on each.and provide descriptive and explanatory data on each.

the labour force:the labour force:

All those ready, willing and able to work - including those currently employed.

All those ready, willing and able to work - including those currently employed. Therefore - unemployed = those members of

the labour force who are actively seeking

employment.

Therefore - unemployed = those members of

the labour force who are actively seeking

employment.

Therefore - unemployment rate = % of labour

force currently unemployed.

Therefore - unemployment rate = % of labour

force currently unemployed.

who is surveyed?who is surveyed?

approx. 54,000 households selected to complete questionnaire each month for a 6 months.

approx. 54,000 households selected to complete questionnaire each month for a 6 months.

cross-sectional population samplecross-sectional population sample

15 yrs. of age and over (non-institutionalized)

15 yrs. of age and over (non-institutionalized)

- not included: - those living on

reserves, full-time members of

the Armed Forces, the

institutionalized

- not included: - those living on

reserves, full-time members of

the Armed Forces, the

institutionalized

- each prov. divided into geographical groups

based on socio-economic commonalities.

- each prov. divided into geographical groups

based on socio-economic commonalities.

http://www.statcan.gc.ca/pub/71-543-g/2012001/appendix-app

endice2-eng.htm

http://www.statcan.gc.ca/pub/71-543-g/2012001/appendix-app

endice2-eng.htm

How?How?

current statisticscurrent statistics

For September 2013, Canada’s national unemployment rate was reported to be 6.9%

For September 2013, Canada’s national unemployment rate was reported to be 6.9%

unemployment rate limitationsunemployment rate limitations

what does “actively looking” mean? - dishonesty possiblewhat does “actively looking” mean? - dishonesty possible

does not include the underemployed.does not include the underemployed.

some discouraged, give up and therefore no longer looking - but still not working.some discouraged, give up and therefore no longer looking - but still not working.

as always - simple error in calculation - perhaps due to mis-information.as always - simple error in calculation - perhaps due to mis-information.

types of unemploymenttypes of unemployment

cyclical - cyclical - due to fluctuations in the business cycle.due to fluctuations in the business cycle.

frictionalfrictional- between jobs - often looking to improve.- between jobs - often looking to improve.

seasonalseasonal- i.e. construction, fishing.- i.e. construction, fishing.

structuralstructural- due to technology - i.e. job replaced by robot- due to technology - i.e. job replaced by robot

insurance inducedinsurance induced- it’s too good not working.- it’s too good not working.

youthyouth- due to lack of experience.- due to lack of experience.

full employmentfull employment

highest reasonable expectation of employment for an economy.

highest reasonable expectation of employment for an economy.

’50’s and ’60’s - full employment was felt to be an unemployment rate of 3% or less.’50’s and ’60’s - full employment was felt to be an unemployment rate of 3% or less.

today full employment ranges between 6% and 8%.today full employment ranges between 6% and 8%.

effects of unemploymenteffects of unemployment

on the individual: - stress, discouragement, disruption to family, lowered self-esteem, potentially lagging skills.

on the individual: - stress, discouragement, disruption to family, lowered self-esteem, potentially lagging skills.

on economy - loss of output as indicated by the GDP gap. (also referred to as the output gap)>on economy - loss of output as indicated by the GDP gap. (also referred to as the output gap)>

difference between actual GDP and potential GDP that would be reached at a level of full employment.

difference between actual GDP and potential GDP that would be reached at a level of full employment.

GDP GapGDP Gap

how can unemployment be lowered?how can unemployment be lowered?

early retirement incentives

job training/retraining

job security

work-sharing programs

unemployment insurance

early retirement incentives

job training/retraining

job security

work-sharing programs

unemployment insurance

unemployment insuranceunemployment insurance

paid out if a worker looses their job through no fault of their own.

paid out if a worker looses their job through no fault of their own.

must be out of work for two weeks.must be out of work for two weeks.

must have worked min. # of insurable hours. - btwn. 420-700 depending on regional unemploy. rate.must have worked min. # of insurable hours. - btwn. 420-700 depending on regional unemploy. rate.

benefits paid out for 14-45 weeks - again depending on regional unemploy. rate.benefits paid out for 14-45 weeks - again depending on regional unemploy. rate.

may receive 55% of avg. insured earnings up to max. of $40,000may receive 55% of avg. insured earnings up to max. of $40,000

The composite leading The composite leading indicatorindicator

The composite leading The composite leading indicatorindicator

(CLI)(CLI)

First: Economic indicators can be seen as Leading, Lagging, or Coincidental to economic change.First: Economic indicators can be seen as Leading, Lagging, or Coincidental to economic change.

LEADING: Signal future economic trends - i.e. building permits LEADING: Signal future economic trends - i.e. building permits

LAGGING: follows economic trends - i.e. unemployment, CPI

LAGGING: follows economic trends - i.e. unemployment, CPI

COINCIDENTAL: occur at about the same time an economic change occurs. i.e. personal income levels, GDP

COINCIDENTAL: occur at about the same time an economic change occurs. i.e. personal income levels, GDP

Composite leading indicator:Composite leading indicator:

comprised of 10 components which lead cyclical activity.comprised of 10 components which lead cyclical activity.

represent all categories of GDPrepresent all categories of GDP

thus reflect mechanisms that can cause business cyclesthus reflect mechanisms that can cause business cycles

component specifically selected as representing very sensitive indicatorscomponent specifically selected as representing very sensitive indicators

therefore will always be more volatile than GDPtherefore will always be more volatile than GDP

components of the clicomponents of the cli

housing index

business and personal service employment

TSX price index

money supply (M1)

U.S. conference board leading indicator

average manufacturing work week

new orders for durable goods

shipments/inventories of finished goods

sales of furniture and appliances

other durable goods sales

housing index

business and personal service employment

TSX price index

money supply (M1)

U.S. conference board leading indicator

average manufacturing work week

new orders for durable goods

shipments/inventories of finished goods

sales of furniture and appliances

other durable goods sales

clicli

4 of the 10 components come from a source other than Statistics Canada

4 of the 10 components come from a source other than Statistics Canada

housing - from MLShousing - from MLS

TSX - comes from TSXTSX - comes from TSX

M1 - comes from Bank of CanadaM1 - comes from Bank of Canada

U.S. conference board - from U.S.U.S. conference board - from U.S.