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Unemployment cycles in Canada

During the recession of the early 1980s and early 1990s, the unemployment rate hit the double-digit mark in the space of one year, shooting up to 11.0% in 1982 from 7.6% the previous year, and 10.3% in 1991 from 8.1% in 1990.

At the same time, economic activity, as measured by gross domestic product (GDP), also shrank dramatically, registering a drop of 2.9% in 1982 after a 3.5% gain the previous year, and falling by 2.1% in 1991 after increases of 0.2% in 1990 and 2.6% in 1989.

During the early 1980s recession, unemployment reached a high of 12% in 1983 even as the economy recovered and grew by 2.7% that year. As the recovery continued, unemployment fell steadily to a low of 7.5% in 1989, before it started to increase again as a result of a slowdown (GDP year-over-year growth had slowed from 5% in 1988 to 2.6% in 1989, 0.2% in 1990, and -2.1% in 1991). A similar pattern characterized unemployment in the early 1990s.

Except for a short and mild downturn in the early 2000s, most of the current decade saw a steady decline in unemployment, until the last quarter of 2008, when the labour market started to show signs of weakness. This weakness was confirmed by labour force data for early 2009. Unemployment shot up 0.6 percentage points to 7.2% in January 2009, and a further 0.5 points to 7.7% in February.

On the other hand, real GDP declined 0.8% in the fourth quarter of 2008, the sharpest quarterly decline since 1991, and fell by 1.0% in December. Although GDP growth for the year 2008 was positive at 0.5%, this was a considerable deceleration from 2.7% in 2007.