Unemployment Ends Governments

June 1st, 2020 | RR

Historically, whenever Canada's unemployment rate has risen above what is considered normal, incumbent governments have been wiped out by voters. As Canada's unemployment rate hits historic highs, history has a very good chance of repeating itself—despite the Liberal Party's high polling numbers.

As we edge closer to a possible election call, Justin Trudeau's fate could be decided by Canada's post-Coronavirus employment numbers. Many are predicting Trudeau will make the call this fall, possibly as soon as late September, giving Canadians an election date somewhere in and around mid November. If current polls are accurate, Trudeau's handling of the pandemic is being rated highly by most Canadians and the Liberal Party is polling in majority territory. However, it's tough to beat solid and consistent historical trends.

The fate of a Liberal majority will hinge on whether Canadians begin to put the pandemic behind them and focus on jobs and the economy. As of now, there are indications that the Coronavirus is becoming a thing of the past. Fear is subsiding, provinces are opening up and statistics from provinces that have done well are showing a more moderate mortality rate than previously suggested. The average age of mortality in Western provinces for COVID-19 is 82. As summer opens up, people are out in parks and public spaces, showing less concern, ready to move on from the pandemic.

If a dreaded second wave never happens, there is a good chance that poll numbers will shift away from Liberals if the economy doesn't start to improve by late September.

The problem we face in this situation is a minority government that has the strong backing of three left-wing parties. If the polls shift away from Liberals and unemployment rates do not begin to decline soon enough, there will be no election. Trudeau will hold off.

If poll numbers remain strong going into September, Trudeau will likely call an election.

The chances of a November election turning out to be disastrous for Liberals would still be high if they go in with strong polling numbers. Despite polling at 40% or higher, a strong campaign by opposition parties in a time of economic turmoil and record high unemployment could sink the Liberals quickly. Often enough, polls tend to fluctuate significantly as voters get closer to election day. Once it comes time to get serious about choosing the next government, voters become more engaged and reflective.

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If historical trends are any indication, the Liberals would lose in a landslide if the unemployment rate remained anywhere above 7%.

Some might think that Canadians would be more sympathetic toward the government due to the circumstances, but that hasn't always been the case. The Great Depression sunk the incumbent Conservatives in 1935, despite the government introducing bold measures to mitigate the damage. Feeling that Prime Minister Bennet had not done enough to stimulate the economy, voters tossed him out. At the time, the unemployment rate had significantly declined from a high of nearly 20% in 1930 to just 11% in 1935. To voters, that wasn't good enough.

Conservatives wouldn't see power again until 1957—when unemployment levels breached 7% and reached as high as 8% in 1958. The 1957 election saw Diefenbaker's Progressive Conservatives win a minority, later to be followed up by a majority government less than a year later in 1958. From there, PCs and Liberals remained neck-and-neck for decades, failing to win any stable majority governments until the early 1980s, when a global recession and oil shock began to take hold.

Again, in 1984, coming off the heals of a major recession, the incumbent Liberals were wiped out by Brian Mulroney's Progressive Conservatives. By the time voters went to the polls, Canada's unemployment rate was hovering around 11%. It had increased from an average of 7% in 1980.

Mired in a corruption scandal, Mulroney's old PCs were wiped out in 1993—but what else was a factor in their demise? You guessed it. An 11% unemployment rate. The number one issue on voter's minds in 1993 was the economy. Following yet another recession, unemployment had soared and voters weren't feeling too sympathetic.

Fast forward to today and we have one of the worst economic situations since the Great Depression. This economic crisis makes the early 80s and 90s recessions look like nothing, so it would be hard to imagine voters feeling any different now than they did during those hard times. If anything, they feel much worse.

Now, think about this: during the 2008/2009 recession, Canada's unemployment rate only went above 8% for two years, before declining to slightly above 7% during the 2011 election—when Stephen Harper won his majority. This shows us exactly how unemployment rates can make or break an incumbent government. Successfully managing unemployment rates has been a fairly successful method. Any time the unemployment rate has risen far above 7% in an election year, voters have flipped the script. With that said, 7% is still a high number and can spell doom for a government if the electorate feels the economy isn't stable—or if the incumbent government becomes generally unpopular.

Historical trends have been broken before, but not often. Even in the United States, high and unstable unemployment numbers have spelled trouble for incumbent presidents. Many analysts and prognosticators have developed successful models and methods to predict elections using data on unemployment and other factors. This doesn't mean that 7% will always be the deciding threshold. This year, the goal posts may have moved, but we won't know until we see the actual results. This pandemic could create an historical anomaly.

Justin Trudeau better hope it does, or he's in trouble. Unless we are living in some sort of utopian, welfare paradise where citizens are completely delusional and cataleptic. 

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