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Canada’s tight labor market is getting more questionable with each data release. Statistics Canada (Stat Can) data reveals employment insurance (a.k.a. unemployment) claims jumped in July. Excluding the pandemic, the country hasn’t seen this many claims since 2008. The surge occurred alongside a major uptick in claim disqualifications.
Canada Has Seen A Major Uptick In Unemployment Claims
Employment insurance claims are ripping higher, especially for the time of year. Claims rose 9.6% from last year, hitting a whopping 404k initial claims and renewals in July. Prior to 2020, claims were last this high in December 2008.
More Canadians Are Seeking Unemployment Benefits
New claims and renewal for employment insurance benefits in July of each year.
Source: Statistics Canada; Better Dwelling. *Data unavailable as program temporarily replaced with CERB due to the pandemic.
A Tight Labor Market That Resembles A Recession
The nearly 10-point annual growth observed is unusually high for the month. Excluding 2020, the last July to climb this much was back in 2016, post-Oil Patch recession. There’s a big difference between then and now though—this isn’t a recession. In theory, Canada is just above its record low unemployment. It’s an unusual combination, to say the least.
Canadian Unemployment Claims Are Showing Recession-Like Growth In A “Tight” Market
Annual percentage growth for employment insurance claims for July of each year.
Source: Statistics Canada; Better Dwelling. *Data unavailable as program temporarily replaced with CERB due to the pandemic, making 2022 growth unobtainable.
Canada Is Disqualifying More People From Unemployment Benefits
Claim disqualification is also on the rise, making the issue even stranger. Over the past year, there was a 52.2% increase to 98k disqualified claims in July. Prior to 2020, it was the most claims for a July since 1993, and the highest growth since 1973. Something is brewing, and it doesn’t sound like good news.
Canada Disqualified The Most Employment Insurance Claims of Any July Since 1993
Canadian disqualified employment insurance claims for July of each year.
Source: Statistics Canada; Better Dwelling. *Data unavailable as program temporarily replaced with CERB due to the pandemic.
Claim disqualification occurs for various reasons, from being employed to failing documentation. The largest share is a mystery, with 2 in 5 disqualified claims due to “other reasons.” The highest growth reason is that the applicant was still employed, rising 557% from last year. Yes, it’s nearly 6x the volume of last July, and 5x the amount in 2019.
An uptick in this area is easy to dismiss as just fraud, but it may reveal a little more. Households may need more money to meet their cost of living hikes. Issue or not, the takeaway is that households are weaker than thought. It’s also a theme that appears to apply to the general employment claim data.
Canada has seen an unusually large uptick in claims for employment insurance. It may be volumes we’ve seen before, but typically not outside of a recession. The rate of growth also implies momentum is picking up in the wrong direction.
The timing is also a bit of an issue. Claims are at recession volumes, but the unemployment rate is just above record lows. Tight labor markets usually don’t see rising claims and claim fraud. That leaves even more questions about the accuracy of the model used for unemployment data.
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