BC Job Market is Almost Certainly Stronger than Labour Force Survey Suggests

October 23, 2015
Ken Peacock

It has been somewhat challenging making sense of BC’s job market over the past couple of years. So far in 2015, Statistics Canada’s Labour Force Survey (LFS) shows overall job growth in the province running at a modest 0.8%, based on year-to-date data through September. Looking just at payroll employment (that is, taking self-employment out of the total job count), the number of employees is up by meagre 0.2% year-to-date, according to the LFS. The difficulty is that this puny increase in the number of employees is not consistent with other economic indicators for BC, such as strong gains in retail spending, a buoyant housing market, and a busy construction sector.

Nor is the story told by the LFS consistent with a second source of employment data that points to a much stronger job market than the LFS data suggest. The Survey of Employment, Payrolls and Hours (SEPH) reports that payroll employment in BC is up 1.8% so far this year, a very different picture than the LFS paints. The SEPH is a survey of employers, and it uses administrative data while the LFS asks a random sample of individuals about their employment status. Although short-term differences in the two readings of the labour market are common, usually the surveys are in broad alignment. Recent differences, however, have been sizable and fairly long-lasting.

As is evident in the first graph, after tracking in different directions in 2013, the LFS and SEPH employee counts converged in early 2014. But a large gap has again opened up, with the LFS recording unusually weak growth in the number of employees for much of the past 18 months. The data from SEPH are more consistent with other economic indicators and, arguably, provide a more accurate reflection of current trends in the BC job market.

Examining the two series using annual averages of the monthly data juxtaposed against economic growth (real GDP) further highlights our concern that the LFS may be again under-reporting job growth in BC. As depicted in the second graph, in most years the LFS and SEPH are generally aligned and broadly move in tandem with real GDP growth (although the SEPH was slower to register a recovery in 2010). Back in 2013, the LFS reported an annual contraction in payroll employment of 0.2%, while the SEPH indicated that the number of employees in BC rose by 2.2%. Note that in 2013 BC’s economy grew by 1.9% (after adjusting for inflation). A contraction in the number of employees working in BC is not consistent with an economic expansion of around 2% after inflation. Barring a steep rise in the number of employees in the LFS reports over the final quarter of this year, it appears that a similar pattern is unfolding for 2015. At BCBC, we expect real GDP growth for BC this year to come in at 2.4%. Most forecasters also see growth in excess of 2% for this year. As in 2013, economic growth of this magnitude is not consistent with the minuscule 0.2% gain in employees reported by the LFS.

It is important to recognize that the above discussion is in no way meant to discredit the Labour Force Survey. The LFS is the most comprehensive source of labour market information in Canada and has long been a valuable source of information for governments, policy makers, planners and economists. But the reality is all surveys are subject to errors, and at times may not fully capture changes in the economy. The fact that other key BC economic indicators are reasonably healthy right now does suggest that the LFS is under-reporting growth in the number of employees and that the SEPH is likely providing a more accurate assessment of current labour market conditions. At a minimum, anyone trying to evaluate labour market developments in the province should augment what the LFS data are saying by also examining the SEPH data. Perhaps an average of the two series would be a good representation of what is actually happening in BC in terms of job creation.

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