At last count, almost 1.45 million Canadians were unemployed. And I’ll bet not one of them can find a silver lining in the fact that they can’t find work. And I’ll bet they are shedding tears.

I was troubled Friday when I read a research note by one of Canada’s leading economists, pointing ahead to this week’s jobs report and suggesting that we “don’t cry too many tears” if it takes “a bit longer” for the jobless rate to drop markedly from its uncomfortably high level of 7.8 per cent. In fact, I read it four times to make sure this was what he was really saying.

Here’s what Avery Shenfeld of CIBC World Markets wrote:

“Canada’s job figures will be out this coming Friday, and in one interesting twist, there would be reason to not be too disappointed if the unemployment rate fails to fall from its current 7.8-per-cent perch. Of course, we all want the country to see strong economic growth that puts more Canadians to work. But the recent stickiness of the jobless rate, despite what looks to have been an impressive 4-per-cent pace to economic growth in the first quarter, carries a silver lining.”

I can’t see any silver lining in the fact that 567,900 men, 467,000 women, and 412,700 young people can’t find work, an ugly legacy of the financial crisis and recession.

And just to be clear, Mr. Shenfeld is not for a moment suggesting he doesn’t want more people back at work. He’s a respected economist, and rightly so. I don’t for a second believe that he would not want the jobless rate to come down, and is, rather, looking at this with a different take and an economist’s analysis.

But his rationale on this one might fall on deaf ears at the jobless centres and food banks across the country, where those who despair don’t much care about the economy’s non-inflation capacity, labour productivity, and the Bank of Canada’s assessment of the output gap.

Here’s Mr. Shenfeld’s argument in its entirety:

“The unemployment rate, along with capacity use and various measures of price pressures, is an input into judging how far the economy is from its non-inflationary capacity. When the unemployment rate tumbles, capacity use climbs, and core inflation accelerates. The Bank of Canada takes that as evidence that the economy is getting closer to its non-inflationary potential. At that point, too much growth becomes too much of a good thing in terms of maintaining price stability, prompting interest rate hikes to slow the economy’s advance.

“We’ve already seen some surprisingly low core inflation figures - 0.9 per cent on a 12-month basis - that cast doubt on the Bank of Canada’s last estimate for where potential GDP lies, hinting at more elbow room for growth before we hit the inflationary wall. Similarly, the last couple of months saw the unemployment rate tick higher again, pointing to more slack in the labour market than we earlier thought, and a stronger pace to productivity. If that is sustained in the March labour force report in the week ahead, it could compel the Bank of Canada to upwardly revise its estimate of the level and growth rate for ‘potential’ non-inflationary GDP.

“Such a revision would substantially offset the impact of faster-than-expected GDP growth on the bank’s assessment of the ‘output gap,’ the difference between actual GDP and its non-inflationary potential. Note that the Bank of Canada last forecast only 2.5-per-cent growth for the first quarter, while data to date point to at least 4-per-cent growth, even if February and March disappoint. Without an adjustment to potential, the bank would be moving up the date for the next rate hike ... Instead, a finding that there was more headroom for growth would be enough to justify waiting a few more months before pulling the trigger.

“More importantly, achieving faster growth without huge employment gains is synonymous with gains in output per worker. Such productivity achievements are critical if Canadian businesses are to remain competitive while paying their workers in an appreciated loonie. Add it all up, and don’t cry too many tears if we find ourselves waiting a bit longer for a major drop in the unemployment rate, even if those without jobs, and, no doubt, Stephen Harper, might wish for a sharper decline in the week ahead’s report.”

We are a caring and just society, and I believe, and hope, that Mr. Shenfeld may be alone in suggesting we don’t shed too many tears when too many desperate people are desperately seeking work.

Over all, economists believe this Friday’s report from Statistics Canada will show the labour market rebounded in March, creating, hopefully, something in the area of 30,000 jobs. The unemployment rate, again hopefully, could dip to 7.7 per cent or, better still, 7.6 per cent.

If it doesn’t, Mr. Shenfeld may not shed a tear, but I might.

Article provided by The Globe and Mail

http://www.theglobeandmail.com/report-on-business/top-business-stories/dont-cry-over-jobless-rate-economist-says-seriously/article1969511/