Long-term unemployment swells as the Canadian economy comes to grips with the pandemic.

Statistics Canada has reported a worrying trend- there has been a spike in the number of unemployed individuals who have been out of work for 6 months or more. While job growth remained positive, long term unemployment soared as approximately 450,000 workers were considered long-term unemployed in October.

Long-term unemployment poses a serious problem, as it causes widespread effects on the economy. While short-term unemployment occurs in most economies due to seasonal, frictional and voluntary fluctuations, long-term unemployment, which can be attributed to structural and cyclical changes, such as the demand-deficient unemployment being caused by the COVID-19 crisis, can pose serious problems. It also signifies a labour market that is unable to clear, due to a general shortage of demand in the economy.

The COVID-19 crisis poses a unique set of problems for economic policy. The nature of the pandemic has forced productivity levels down, due to the required social distancing and self-isolation measures, meaning that factories and workplaces are having to operate at less than optimal capacity. As output generation decreases, so do revenues, and hence employees have to be laid off, or be made redundant as the company cannot support them.

To help the labour market re-adjust, upskilling is required to prevent a ‘hysteresis’ among workers. While the economy continues to add jobs, these jobs tend to be higher-skilled jobs, rather than production-line jobs where major redundancies are arising.

Canada’s October unemployment rate stood at 8.9% in October compared to 9% in September. Moreover, in a province-by-province analysis, Newfoundland and Labrador faced some of the highest unemployment rates across the country, at 12.8% in the month of October, which was down from 14.8% the month before.

However, such numbers should be analysed with caution, owing to the fact that the COVID-19 crisis poses a very unique set of problems. Therefore, unlike previous recessions, economies will be able to get numbers back under control, however not in the near future, as life after a vaccine still remains cloudy.