labour force surveylabour force surveyand

THE COMPOSITE THE COMPOSITE LEADING INDICATORLEADING INDICATOR

What?

The most timely and important measure of employment/unemployment levels

Main objective

to divide working-age population into three groups:

employed unemployed not in the labour force

and provide descriptive and explanatory data on each.

the labour force: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 - unemployment rate = % of labour

force currently unemployed.

who is surveyed?

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

cross-sectional population sample15 yrs. of age and over (non-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.

http://www.statcan.gc.ca/pub/71-543-g/2012001/appendix-appendice2-eng.htm

How?

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

unemployment rate limitations

what does “actively looking” mean? - dishonesty possible

does not include the underemployed.

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

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

types of unemploymentcyclical - due to fluctuations in the business cycle.frictional- between jobs - often looking to

improve.seasonal- i.e. construction, fishing.

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

insurance induced- it’s too good not working.

youth- due to lack of experience.

full employment

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.

today full employment ranges between 6% and 8%.

effects of unemployment

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)>

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

GDP Gap

how can unemployment be lowered?

early retirement incentives

job training/retraining

job security

work-sharing programs

unemployment insurance

unemployment insurance

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

must be out of work for two weeks.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.may receive 55% of avg. insured earnings up to max. of $40,000

The composite leading The composite leading indicatorindicator

(CLI)

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

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

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

Composite leading indicator:

comprised of 10 components which lead cyclical activity.

represent all categories of GDP

thus reflect mechanisms that can cause business cycles

component specifically selected as representing very sensitive indicators

therefore will always be more volatile than GDP

components 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

cli4 of the 10 components come from a source other than Statistics Canada

housing - from MLS

TSX - comes from TSX

M1 - comes from Bank of Canada

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