Sure. Thanks.
We've always put a great emphasis on looking at a wide range of indicators when it comes to measuring the amount of slack in the economy. This time we chose to feature some of those a little bit more prominently.
The conventional measure basically looks at the output side and in fact probably misses some of the extra slack that we are seeing in labour markets at this time. This is really just a function of the cycle that we've seen where you do get output that's really hit and you've got a destruction of capacity and people leaving their jobs, either voluntarily or involuntarily, and a spike in unemployment. It takes time through the phases for that labour market slack to be absorbed up.
One really good way to look at this is the chart that shows our labour market indicator, which the governor spoke about. What that does is it looks at a number of other factors aside from the unemployment rate and sees what's the big difference, why the labour market indicator is showing way more slack than the conventional unemployment rate.
There are a couple of things I can point to that give a tangible example of why that is. One is the amount of involuntary part-time employment. It's true that part-time employment has been a major source of employment growth, but not only that, it's that about 28% of it is not voluntary. Another factor is just the average duration of unemployment. We talk about the scarring; whether it's young people or prime age people, the longer they're unemployed, the more likely it is that it will be difficult for them to become re-employed. We see that the duration of unemployment is up to about 22 weeks. You add that with the decline in the participation rate. We calculate that the climb we've seen this year is about twice as much as you would have expected given the demographic change. We know people are retiring, but the prime age people or the young people who are leaving the labour force are probably not retiring.
The good news is it means that there is room in the economy to grow and for the labour market to grow without being inflationary. That's why we have put some emphasis on it now as we're looking towards how much slack is left in the economy and what's the appropriate monetary policy.