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Bad Unemployment and No Pensions

in Pensions, Retirement Savings, Unemployment

From 2009 the February Unemployment Numbers were quite dismal. Also, bad news about Pension valuations as well. Luckily I got my pension out before Nortel’s went under.

Unemployment Up Again

First, we see that the Labor Force Survey for February is out, and it paints a gloomy picture. 

Employment fell for the fourth consecutive month in February (-83,000), bringing total losses since the peak of last October to 295,000 (-1.7%). The February employment decrease pushed the unemployment rate up 0.5 percentage points to 7.7%.

Ontario led the way as the biggest job loser, and I was disheartened to see that the biggest group (by age and gender) of losers are males from 25-54 (yes I fit in that range).  This isn’t really news to me, given what I hear from former co-workers and what I see in job hunting, but it is still a little depressing.

Unemployment Graph
Unemployment Graph

 The biggest hiring area with losses is of course construction, given how tight money has become there is not a lot of money being thrown around for new construction projects.

Another telling commentary is:

Since last October, just over half of the country’s total employment losses have occurred in Ontario, well beyond the province’s 39% share of the total working-age population. Employment in the province fell by 160,000 during this period, with the largest decreases in manufacturing; business, building and other support services; and construction.

Not a rosey picture for Ontario. 

Pensions Lose a lot

The other interesting employment figure last week was the fact that pensions in the private sector shrunk by a significant amount in the last quarter of 2008:

The market value of assets held in employer-sponsored pension funds fell by 8.7% during the third quarter to $869.0 billion, the largest quarterly decline in a decade.

The decline, equivalent to $82.7 billion, was the result of a significant drop in stock prices and foreign investments. The third-quarter level was well below the peak of $954.6 billion reached at the end of 2007.

Why is this significant? Well most financial planners will tell you that as you age the less variability should be built into your retirement savings (i.e. you should have less risk in your portfolio) and that usually means holding less in stocks and more in GICs and other safe, slow growth savings entities.

It seems the pension funds are not following this advice, with an aging population there still seems to be a significant investment in the markets by these funds?  Now is not the time to be losing significant portions of your funds (i.e. when a lot of folks are about to be drawing on your accounts), but maybe this is just me, and I don’t quite understanding the mathematics of the whole pension business.

With the Baby Boom generation about to hit retirement (or hitting retirement) will they get to retire? I suspect that the concept of “retirement” is going to change in the next 10 years.

Previous Months Unemployment for 2009

{ 3 comments }

  • CanadianFinance March 16, 2009, 11:09 AM

    The spike in unemployment rate is disturbing. If it gets as bad as the 80’s, I wonder if we’ll hit 10%?

    Reply
  • DAvid March 16, 2009, 9:56 AM

    C8j,
    I believe the market has lost about 30% over the last 6 months. If pension plans have only lost 8.7, they have done well. Remember, many of the participants in these pensions have a considerable time until retirement, so a comparison to an individual plan is likely inappropriate.

    Retirement has indeed already changed. No longer is 65 a mandatory age for retirement any more; “Freedom 55” is no longer promoted, and more folks see retirement as moving from a scheduled 8 hour work day to a more relaxed pace, at something the individual better enjoys.

    DAvid

    Reply
  • Dana March 16, 2009, 9:29 AM

    Pension funds are typically gigantic investment vehicles, do they take into account the % of ready to retire baby boomers into account when allocating the funds?

    Reply

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