Table I: Unemployment rate recalculated
Q1 2018
|
Year 2018
| |
Unemployment rate
|
7.1
|
6.9
|
Unemployment rate (recalculated)
|
7.7
|
7.1
|
Exclusive of the activity rate effect, it is 7.7% in Q1 2018 and 7.1% for 2018
The graph below clearly shows the activity has been falling drastically since 2015 and this explains largely the dipping unemployment rate. Though employment growth is picking up , the average for the period 2015-17 is only 0.6% compared to 1.0 % over period 2012-2014. In terms of absolute numbers, over the period 2015-2017, an annual average of 4,730 jobs were being created compared to an annual average of 8,330 over the previous period.
Please also note that LF growth dipped in 2016 and has picked up since but it is still lower than the average rate of the previous period.
The activity rate has fallen from 60.4 in 2015 to 58.8 for the 1st Quarter of 2018. The activity rate is on a declining trend and it is reasonable to assume that it will be around 59.0 in 2018. And If we want to find out what is the effect of this fall of activity rate on the employment rate, we have to nullify its effect by keeping it constant. That is if we assume that participation rate were the same today as it was in 2017 , what would the unemployment rate look like? The labour force would then be 598,300. ( 0.596 x the present population of 16 years and above) And the 2018 employment level is 552,100. The unemployment rate is thus 7.1 percent for 2018.
As for the Q1 of 2018 as compared to Q1 2017, the activity rate drops from 59.2 to 58.5 and this has the effect of lowering the unemployment rate from 7.6% to 7.1%. However, if there were the same number of people looking for work over the period, the unemployment rate would have increased from 7.6 percent in Q1 2017 to 7.7 percent in Q1 2018 .
The main reason thus that the unemployment rate has come down is because of the lower activity rate due to demographics-the ageing workforce and more people going into retirement.
