seasonal unemployment in canada, 1951-7

Seasonal Unemployment in Canada, 1951-7Author(s): Douglas HartleSource: The Canadian Journal of Economics and Political Science / Revue canadienned'Economique et de Science politique, Vol. 24, No. 1 (Feb., 1958), pp. 93-98Published by: Wiley on behalf of Canadian Economics AssociationStable URL: http://www.jstor.org/stable/139118 .

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NOTES AND MEMORANDA

SEASONAL UNEMPLOYMENT IN CANADA, 1951-7*

DOUGLAS HARTLE

University of Toronto

THE public has become increasingly concerned with the problem of winter unemployment. Three years ago the federal Government inaugurated a programme designed to increase winter employment. First, an intensive publicity campaign was launched which attempted to increase the volume of home im- provements carried out during the winter months. Second, the Government tried to change its work schedule, and the work schedule of its contractors, in order to increase, wherever possible, the volume of its work done during the winter. Finally, it urged the provincial governments to change their work schedules in the same way. This note seeks to show that, despite the federal Government's programme, the magnitude of the seasonal increase in unemployment has been steadily increasing. Some attention is also given to the possible reasons underlying this deterioration and the direction that future Government action might take.

That the amplitude of the seasonal variations in the number of persons with jobs has increased can be seen from the top panel of Figure 1.1 In 1952, employment at the trough in February was 3.6 per cent below the trend-cycle value.2 Five years later, in 1957, employment at the February trough was 4.6 per cent below the trend-line value-a decline of one percentage point. The difference is small in percentage terms, but it is estimated that 56,000 more persons would have had jobs at February, 1957, if the 1952 seasonal pattern had persisted to that date.3

The increased seasonality in employment has not been entirely compensated for by increased seasonal declines in the size of the labour force. This is shown by the seasonal indexes plotted in the middle panel of Figure 1. The percentage increase from trough to peak (August to February) in the seasonal indexes of the number of persons without jobs and seeking work increased from 137.5

*I wish to acknowledge the advice and assistance of H. Neilly and G. Helleiner. Any errors in the data or in their interpretation are, however, the sole responsibility of the author.

lThe number of persons with jobs is taken from Dominion Bureau of Statistics, Special Surveys Division, The Labour Force (monthly bulletins). A hand-adjusted moving seasonal technique, such as that described in Frederick E. Croxton and Dudley J. Cowden, Applied General Statistics (New York, 1948), 500-8, was applied to quarterly data for February, May, August, and November, 1949-57.

2The term "trend-cycle value" is used to describe the series after the seasonal variations have been eliminated.

3When the seasonal index for February, 1952, is applied to the seasonally adjusted number of persons with jobs at February, 1957, it provides an estimate of the number of persons with jobs at February, 1957, assuming that the 1952 seasonal pattern remained unchanged over the period.

93

Vol. XXIV, no. 1, Feb., 1958



Persons With Jobs

/0o3.i0. t Ieel;)

Persons Without Jobs and Seeking Work

/Oyld-- l -/-o

l/.'.. ~ e . '

and Seeking IWork

s: .1 't

Registrations at -6s "/5 N.E.S. Offices

ye~

..sO o(^e -/ .

M /ee~~

1951 1952 1953 1955 1956 1957

FIGURE 1. Employment and unemployment at the approximate seasonal peaks and troughs as a percentage of trend-cycle values.

August Scale

n I

i i I

ii

February Scale

.6, ?o-- I



per cent in 1951-2 to 156.6 per cent in 1956-7.4 Had the 1952 seasonal pattern prevailed in 1957, it is estimated that the number of persons without jobs and seeking work in February, 1957, would have been reduced by about 20,000.5

The compensating increases in the seasonal declines in the labour force apparently did not affect the number of live registrations for employment at the offices of the National Employment Service. It is estimated that the number of registrations would have been reduced by about 40,000 had the 1952 seasonal pattern in this series remained unchanged at February, 1957.6 The changes in this seasonal pattern can be observed from the lower panel of Figure 1.7

To examine the factors underlying the increase in the seasonal amplitude of employment, the relative and absolute seasonal change from August to Feb- ruary in the number of persons with jobs was computed by industry. These data are provided in columns (1) and (3) of Table I.

It can be seen that in five industries: transportation, public utilities, mining, trade, and finance and insurance, no clear trend in the magnitude of the relative seasonal changes is discernible. In each of these industries, with the exception of mining, there was a tendency in the earlier years for the winter declines in employment to increase (and the winter increase in employment in finance and insurance to diminish); but there appears to have been a reversal of this trend since the recession year 1953-4.

In agriculture, construction, and manufacturing, which together have ac- counted for over 90 per cent of the decline in employment over the winter months, there has been a steady increase in the magnitude of the seasonal decline since 1951-2. The offset to winter unemployment provided by the service industry was steadily reduced over the period, and in 1956-7 employment in this industry also declined over the winter months. Forestry was still a counter-seasonal industry in 1957; however, the relative and absolute increases in employment from August to February have rapidly diminished over the past five years.

The relative importance of the contributions of the individual industries to the total seasonal decline can be seen from column (4) of the Table. Two important points emerge. Agriculture made a much smaller contribution to the winter decline in 1956-7 than it did in 1951-2. Even though the seasonal change increased from 21 to 28 per cent, the secular decline in employment in this industry was so great as to raise the absolute seasonal decline by much less than in most other industries. The contribution of manufacturing has doubled over the five-year period. Forestry offset 19.1 per cent of the decline;

4The number of persons without jobs and seeking work is taken from D.B.S., The? Labour Force (monthly bulletins), seasonally adjusted by Univac Method II from monthly/ data 1953-7. For the years 1949-52, monthly data were interpolated from quarterly data.. To maintain consistency with the other data, seasonal peaks and troughs are assumed to fall on February and August, respectively. In fact, the seasonal peak occurred in either February or March and the trough consistently appeared in September. This assumption does not significantly alter the conclusions.

5See n. 3. 6See n. 83. 7The number of live applications for employment at N.E.S. offices is taken from Labour

Gazette (monthly), Table Dl, seasonally adjusted by Univac Method II from monthly data. The seasonal peak was assumed to fall in February, and the seasonal trough in August,, for the reasons mentioned in n. 4.

Notes and Memoranda 95



TABLE I

SEASONAL CHANGES IN EMPLOYMENT, BY INDUSTRY, 1951-7

Contribution Percentage change Est. seasonal of each

in seasonal Employ- change industry to total employment indexes ment at in 1000's seasonal decline

Industry Aug. to Feb.* Aug. personst in employment: (1) (2) (3) (4)

Agriculture 1951-2 -21.7 1,066 -231 61.8 1952-3 -22.1 1,012 -224 54.6 1953-4 -23.3 975 -227 50.8 1954-5 -25.4 1,016 -258 52.2 1955-6 -27.1 960 -260 50.4 1956-7 -28.3 946 -268 49.4

Construction 1951-2 -26.3 388 -102 27.3 1952-3 -28.5 399 -114 27.8 1953-4 -30.1 409 -123 27.5 1954-5 -31.4 390 -122 24.7 1955-6 -32.4 432 -140 27.3 1956-7 -33.0 480 -158 29.1

Manufacturing 1951-2 - 1.3 1,344 - 17 4.5 1952-3 - 1.7 1,346 - 23 5.6 1953-4 - 2.6 1,411 - 37 8.3 1954-5 - 3.6 1,311 - 47 9.5 1955-6 - 4.2 1,424 - 60 11.6 1956-7 - 4.4 1,452 - 64 11.8

Transportation 1951-2 - 3.1 408 - 13 3.5 1952-3 - 5.2 433 - 23 5.6 1953-4 - 6.1 450 - 27 6.0 1954-5 - 6.2 399 - 25 5.1 1955-6 - 5.4 420 - 23 4.5 1956-7 - 4.7 444 - 21 3.9

Public utilities 1951-2 - 3.4 51 - 2 0.5 1952-3 - 6.4 60 - 4 1.0 1953-4 - 7.8 64 - 5 1.1 1954-5 - 7.5 61 - 5 1.0 1955-6 - 5.4 63 - 3 0.6 1956-7 - 3.1 67 - 2 0.4

Mining 1951-2 - 1.7 82 - 1 0.3 1952-3 - 2.4 97 - 2 0.5 1953-4 - 1.8 93 - 2 0.4 1954-5 - 1.1 100 - 1 0.2 1955-6 - 1.8 114 - 2 0.4 1956-7 - 2.6 118 - 3 0.6

Trade 1951-2 - 1.1 721 - 8 2.1 1952-3 - 2.5 787 - 20 4.9 1953-4 - 3.8 843 - 32 7.2 1954-5 - 4.1 854 - 35 7.1 1955-6 - 3.3 851 - 28 5.4 1956-7 - 2.2 884 - 19 3.5

Service 1951-2 + 1.9 903 + 17 5.7? 1952-3 + 2.5 950 + 24 6.9? 1953-4 + 1.8 954 + 17 4.2? 1954-5 + 1.2 1,009 + 12 2.6? 1955-6 + 0.0 1,058 0 0.0 1956-7 - 0.7 1,118 - 8 1.5

J ~. . . . .



Notes and Memoranda

Contribution Percentage change Est. seasonal of each

in seasonal Employ- change industry to total employment indexes ment at in 1000's seasonal decline

Industry Aug. to Feb.* Aug. personst in employmentl (1) (2) (3) (4)

Forestry 1951-2 +56.6 101 + 57 19.1? 1952-3 +47.7 74 + 35 10.0? 1953-4 +40.8 71 + 29 7.2? 1954-5 +36.0 79 + 28 6.2? 1955-6 +33.9 110 + 37 7.8? 1956-7 +34.1 104 + 35 7.0?

Finance and insurance 1951-2 + 1.6 153 + 2 0.7? 1952-3 + .4 158 + 1 0.3? 1953-4 - .6 171 - 1 0.2 1954-5 - .6 170 - 1 0.2 1955-6 + 1.2 183 + 2 0.4? 1956-7 + 3.4 184 + 6 1.2?

SOURCE: D.B.S., Special Surveys Division, Persons with Jobs by Industry and by Sex (monthly). *Seasonal indexes were computed from quarterly data for Feb., May, Aug., and Nov., 1949-

57. A hand-adjusted, moving seasonal technique was used similar to that described in Frederick E. Croxton and Dudley J. Cowden, Applied General Statistics (New York, 1948), 500-8.

t(1) multiplied by (2). tThe value in (3) for an individual industry for a given year as a percentage of the sum of all

of the negative values in (3) for the same year. Where the individual industry value is positive the percentage is marked with a ?.

in 1951-2, but in 1956-7 the increase in employment in that industry from

August to February offset only 7.0 per cent of the declines in other industries. To say that in at least half of the Canadian industries the proportion of work

done in the summer months is increasing relative to the proportion done in the winter is to describe but not explain the present situation. Among the possible reasons which might be mentioned are: (1) the highly seasonal sub-industry components of the main industries distinguished above may be expanding relatively more rapidly than the less seasonal sub-industry groups; (2) the seasonal pattern of demand may be shifting; (3) changes in the industrial cost structure may be taking place which may make winter operations in-

creasingly unattractive; (4) since a growing proportion of the labour force is

eligible for more generous unemployment-insurance benefits, workers are

perhaps becoming less anxious to find winter work, and employers may feel

increasingly less impelled to provide it on humanitarian grounds. The first two "hypotheses" are amenable to empirical investigation, for most

of the employment and sales-order data have been published. This analysis should be undertaken when sufficient clerical resources are available. With

respect to the third "hypothesis," no consistent body of information on seasonal costs is available against which this explanation could be tested. The Govern- ment might consider the possibility of a survey designed to gather it. The effects on winter employment of changes in the coverage and benefits under the Unemployment Insurance Act, which constitutes the fourth "hypothesis," should also be carefully assessed.

What of the Government's winter employment programme? There is no way of measuring its achievement for there is no way of determining what would have occurred in its absence. It does seem fair to conclude, however, that the

97



Canadian Journal of Economics and Political Science Canadian Journal of Economics and Political Science

programme has been inadequate. It does not appear to have arrested, much less solved, the problem.

There would seem little doubt that both from the point of view of efficiency and welfare, seasonal unemployment in Canada constitutes an increasingly important problem. If any significant reduction in winter unemployment is to be made, it would appear that a fundamental change in Government policy is called for. Just what direction this change should take would depend on the results of the investigations suggested above. Possibly the Unemployment Insurance Commission benefits should be altered in order to stimulate winter

employment. Because the private cost of winter work is almost certainly greater than the social cost, it is possible that tax incentives or subsidies should be

granted to employers in seasonal industries who retain a certain proportion of their work force on the payroll throughout the winter months. Government counter-seasonal rationing of building permits, as a device to promote winter construction, also might be considered.

Whatever the solution may be, attention should be given to this problem immediately, in order to arrest the present trend. It is quite possible that the losses in efficiency and in welfare owing to seasonal unemployment have been

substantially greater than the losses from cyclical unemployment since the war. Without trying to belittle the significance or theoretical interest of the latter problem, it still seems correct to say that the problem of seasonal employment warrants greater attention from the academic economist than it has received.

SOME REFLECTIONS ON CENTRAL BANKING IN CANADA

J. N. WOLFE

University of Rochester

ONE of the reasons usually thought most persuasive by those who advocate reliance on monetary policy is the contention that monetary policy does not disturb the allocative efficiency of the price system as direct controls do. This

argument depends, however, on the assumption that pressure on one part of the capital market is transmitted evenly throughout that market.l This provides the justification for control by a central bank. A control mechanism is required at only one point in the capital market (that is, the banking system), since

pressure in one area leaves the allocative efficiency of the entire market unaffected.

There has been, however, an increasing reluctance to accept the assumption of market perfection in the capital market, an assumption which is fundamental to this approach. And even if the capital market were perfect, some objection might be raised to reliance on central banking on the grounds that sympathetic

lIt is not suggested that the evenness of impact would show itself, even under ideal conditions, in equal percentage declines in all the investment-goods industries affected. The magnitude of decline in the output of the various industries will depend on the slope of the marginal efficiency schedule for the various types of capital goods involved.


programme has been inadequate. It does not appear to have arrested, much less solved, the problem.

There would seem little doubt that both from the point of view of efficiency and welfare, seasonal unemployment in Canada constitutes an increasingly important problem. If any significant reduction in winter unemployment is to be made, it would appear that a fundamental change in Government policy is called for. Just what direction this change should take would depend on the results of the investigations suggested above. Possibly the Unemployment Insurance Commission benefits should be altered in order to stimulate winter

employment. Because the private cost of winter work is almost certainly greater than the social cost, it is possible that tax incentives or subsidies should be

granted to employers in seasonal industries who retain a certain proportion of their work force on the payroll throughout the winter months. Government counter-seasonal rationing of building permits, as a device to promote winter construction, also might be considered.

Whatever the solution may be, attention should be given to this problem immediately, in order to arrest the present trend. It is quite possible that the losses in efficiency and in welfare owing to seasonal unemployment have been

substantially greater than the losses from cyclical unemployment since the war. Without trying to belittle the significance or theoretical interest of the latter problem, it still seems correct to say that the problem of seasonal employment warrants greater attention from the academic economist than it has received.

SOME REFLECTIONS ON CENTRAL BANKING IN CANADA

J. N. WOLFE

University of Rochester

ONE of the reasons usually thought most persuasive by those who advocate reliance on monetary policy is the contention that monetary policy does not disturb the allocative efficiency of the price system as direct controls do. This

argument depends, however, on the assumption that pressure on one part of the capital market is transmitted evenly throughout that market.l This provides the justification for control by a central bank. A control mechanism is required at only one point in the capital market (that is, the banking system), since

pressure in one area leaves the allocative efficiency of the entire market unaffected.

There has been, however, an increasing reluctance to accept the assumption of market perfection in the capital market, an assumption which is fundamental to this approach. And even if the capital market were perfect, some objection might be raised to reliance on central banking on the grounds that sympathetic

lIt is not suggested that the evenness of impact would show itself, even under ideal conditions, in equal percentage declines in all the investment-goods industries affected. The magnitude of decline in the output of the various industries will depend on the slope of the marginal efficiency schedule for the various types of capital goods involved.


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seasonal unemployment in canada, 1951-7

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