The United States is accelerating toward an economic recovery as it sheds COVID-19 restrictions and reclaims a sense of normalcy, far different from the rough patch in Canada’s rebound.
Helped by a speedy vaccination push, the U.S. is showing signs of revival. Baseball fans are back in stadiums, if not at the same density. Domestic travel is on the mend, filling airplane seats and hotel rooms. And restaurant reservations are tougher to snag in New York, once an epicentre of the global pandemic.
Canada, meanwhile, is grappling with a third wave of COVID-19 that’s led to tighter restrictions, along with another round of layoffs in hard-hit service industries.
The divergence will be apparent this Friday, when both countries report their employment figures for April. Private-sector economists suspect the U.S. added about one million jobs last month, while Canada shed 150,000 workers, undoing some recent progress.
While the two countries’ economic growth rates were remarkably similar in the first quarter, the U.S. is running hotter than Canada this spring, powered by an American consumer who’s flush with savings and new options for spending.
“For the most part, this is a vision of what Canadians can expect a few months down the road,” said Royce Mendes, senior economist at CIBC Capital Markets. The U.S. will “probably achieve something that looks like a fully recovered economy about one to two quarters ahead of Canada.”
Once widely mocked for its handling of the COVID-19 crisis, the U.S. has mounted one of the top vaccination drives in the world. As of May 4, nearly 32 per cent of Americans were fully vaccinated, easily best among Group of Seven countries, according to the website Our World in Data. Just more than 3 per cent of Canadians are fully vaccinated. Adjusted for population, Canada has suffered higher rates of infection than the U.S. for several weeks.
Beyond vaccines, the U.S. has been buoyed by government stimulus cheques that have kept families spending through the crisis. Personal income rose a whopping 21 per cent in March compared with February as payments arrived. The Biden administration is proposing another US$4.1-trillion in spending for longer-term initiatives.
“The unstoppable vaccination campaign should remove last obstacles standing on the way of reopening, while excess savings and income support will provide financial means to further turbocharge consumption,” Toronto-Dominion Bank economist Maria Solovieva said in a recent note to investors.
The signs of recovery are piling up. New York, New Jersey and Connecticut said Monday they are lifting most of their restrictions on May 19, allowing restaurants, museums and stores to operate at full capacity.
The number of seated diners at American restaurants is still down from 2019, but has rallied to its strongest level since the initial wave of closing last year, according to data from booking platform OpenTable. In a handful of U.S. states – such as Arizona, Florida and Texas – there’s been a full rebound.
Conversely, Canada’s retail and hospitality sectors are poised for another setback in Friday’s job report, given renewed lockdowns. One of the bleakest estimates comes from Bank of Montreal, which forecasts a loss of 350,000 positions in April, more than undoing gains in March.
“Look for Ontario to be hit hardest (by a wide margin), accounting for the vast majority of job losses,” BMO economists said in a report.
Still, the U.S. has some catching up to do. As of March, Canadian employment was down by just 1.5 per cent from before the health crisis, while the U.S. drop was 5.5 per cent, or roughly 8.4 million people. Several economists credit Ottawa’s wage subsidy program for helping to keep workers attached to their employers.
Despite recent stumbles, Canada is still on course for a resurgent year. The Bank of Canada projects the economy will grow 6.5 per cent in 2021, with the U.S. clocking in at 7 per cent.
Understandably, the coronavirus remains a risk to the outlook. Alberta is seeing the highest rates of infection on the continent, forcing it to announce new restrictions on Tuesday. At a national level, however, the third wave has eased somewhat, a sign of hope for the summer months.
“We’ll have to wait until June to see signs of [labour] recovery from this latest wave of the virus,” Mr. Mendes said. “Our base-case forecast assumes that from then on out, the Canadian economy is putting the pandemic in the rearview mirror.”
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