Labour Force and Unemployment

Labour Force Participation

Anyone under age 15 is excluded from the labour force.Participation Rate: (unemployed persons + population age 15+)/population age 15+.Unemployment Rate: (unemployed persons)/(unemployed persons + employed).

Types of Unemployment

• Cyclical Unemployment: Temporary job loss due to economic recession.Unemployment stats may be underestimated as they often don’t include those who stopped looking for work.

Economic Conditions and Impact on Inflation

Historical Context

Example: The Great Depression showed severe economic contraction and deflation. Macro-economic policies emerged to stimulate private sector demand and prevent future downturns.

Inflation Trends

Inflation was 1.8% in December 2024, influenced by a temporary GST/HST tax break from December 21 to February.The Consumer Price Index (CPI) fell due to the tax break. Predictions for January suggest further CPI drops. Notable declines:

• Restaurant food prices down 1.6% year-over-year in December.

• Alcoholic beverage prices down 1.3% in December.Excluding tax effects, core CPI increased by 2.3%. Future inflation may rise in February due to tariffs from the Trump era, despite ongoing tax breaks.

COVID-19 Economic Response

Federal Government Actions

During COVID-19, the government issued bonds purchased by the Bank of Canada for public payments during lockdowns.STimulus payments were retained by individuals, leading to higher post-lockdown demand, especially in hospitality and travel.

Monetary Policy Insights

Money creation through bonds increased revenue for government support during downturns.Increasing money supply does not equal physical money printing.

Understanding Deflation

Deflation is when inflation falls below 0%, causing negative growth.Historically, post-war recovery shifted from military goods to civilian products, increasing supply and lowering prices.A deflationary spiral occurs when lower future price expectations decrease current demand, leading to reduced production and rising unemployment.