The damage to Canada’s labour market has been swift and unsparing.
Weeks after the COVID-19 pandemic started to rip through the economy in early March, three million fewer people were employed. An additional 2.5 million still had jobs in mid-April, but lost the majority of their work hours because of the pandemic. Over all, more than one in four Canadian workers were significantly affected by lockdown restrictions aimed at curbing the spread of a deadly virus.
But this might be as bad as it gets. Provinces are cautiously reopening their economies. Applications for emergency financial aid have tapered off. Thousands of companies have recently applied for wage subsidies. And new job postings have perked up. When the May employment numbers are released early next month, they could very well show a nascent rebound.
“Given the shock we’re dealing with, we should be careful not to be too optimistic, but we can at least start to have a bit of hope that the worst may be behind us,” Brian DePratto, senior economist at Toronto-Dominion Bank, said in a recent client note.
Undoubtedly, it will take longer to recoup jobs than it did to destroy them. Some industries are nowhere near a return. Moreover, plans for reopening could get derailed by a second wave of infections that some epidemiologists fear is inevitable.
But for now, we’re starting to pick up the pieces. Here is a deeper look at what Canada lost in a matter of weeks, and the challenges ahead. What’s clear is that labour destruction was not evenly felt. The recovery won’t be either.
The industry rebound
In past recessions, Canada’s goods-producing sector bore the brunt of job losses. Making matters worse, the recovery process was sluggish. After recessions in the early 1980s and 90s, it took an average of more than six years for goods-sector employment to return to prerecession levels, Statistics Canada said last Friday. After the 2008-09 global financial crisis, it took 10 years for goods-sector jobs to fully return. In those downturns, services jobs bounced back in an average of four months.
This time around, job losses have been widespread by industry. From February to April, goods-sector employment dropped by 16.8 per cent and services employment by 15.4 per cent, both worse than in the previous three recessions.
The recovery, however, could play out very differently. As provinces begin to reopen, certain service industries in which close physical contact is necessary – say, restaurant and retail work – will remain heavily restricted or shut down. Meanwhile, construction and other goods-producing sectors are starting to ramp back up.
“Things like construction, and even some manufacturing, tend to be more male-dominated jobs, [and] those jobs will be able to come back quickly,” said Tammy Schirle, an economics professor at Wilfrid Laurier University. Dr. Schirle is “very concerned” that service-sector jobs will struggle to recoup their losses quickly, especially in industries in which female representation is high.
“Vulnerable workers” experienced the greatest job losses over the past two months, Statscan said Friday. In percentage terms, part-time workers have suffered more than full-time, temporary workers more than permanent, hourly-wage earners more than salaried, the non-unionized more than unionized and those with less seniority more than longer-serving coworkers.
Here’s another way of putting it: The less you earn, the more likely your work was affected. From February to April, about half of employees earning less than $16 an hour either lost their jobs or the majority of their work hours, according to an analysis of Statscan data by the Canadian Centre for Policy Alternatives, a left-leaning think tank. In other words, if you were earning minimum wage – no province or territory has an hourly minimum above $16 – there was a one-in-two chance your work was significantly affected by the pandemic.
“Employers and governments need to be very careful that those who were hit hardest by initial job losses aren’t also hit hardest in a second wave of infection,” David Macdonald, senior economist at the CCPA, recently wrote. “We may be changing our notions of what essential workers are, but we can’t make them sacrificial workers in the process.”
In normal economic ups and downs, very few people are temporarily laid off. In 2019, for instance, there was a monthly average of about 43,000 people who found themselves in that situation. As of April, that spiked to 1.34 million. Statscan noted that 97 per cent of the newly unemployed in April said they were on temporary layoff and expected to return to work once lockdown conditions are eased.
But what if they’re wrong? Statscan’s Labour Force Survey is filled out by households, rather than by companies. “The employers may have a different perception than the workers do about whether they’re coming back and when,” said Mikal Skuterud, an economics professor at the University of Waterloo.
Looking ahead, it’s possible that some temporary layoffs will turn permanent, weighing on future job gains. “We’ll see, but it’s very likely that this 97 per cent will turn out to be sharply overstated,” Derek Holt, head of capital markets economics at the Bank of Nova Scotia, said in a client note.
When work hours are lost for family reasons – say, a parent stays home to look after a sick child – it’s women who almost invariably make the sacrifice. That’s especially the case during the pandemic, with schools and daycares shut down. In aggregate, employed women lost 5.4 per cent of their usual work hours in April for family and personal reasons, a noticeable uptick; men lost about 1.1 per cent of their usual hours, little changed from recent months.
“So far, personal and family reasons represent a fraction of the total work hours lost amid the current crisis,” Brendon Bernard, economist at hiring site Indeed Canada, said in an e-mail. “Still, the uptick in the share of usual hours lost among women highlights some of the labour market challenges that arise when childcare is unavailable. If schools and daycare remain closed for safety reasons as provinces gradually reopen, this could become a growing issue, particularly for those slated to return to jobs that can’t be done remotely.”
Young Canadians have experienced disproportionate job losses. Over two months, the number of employed youth (aged 15 to 24) plummeted by 873,000 (34.2 per cent). This isn’t surprising. Young people typically have looser ties to employers because of temporary contracts, part-time hours and low seniority, and many of them work in industries that were hit hard, such as retail and food services.
Education hardly blunted the impact. Employment dropped by 34 per cent for youth with a postsecondary certificate or diploma, and by 28 per cent for youth with a university degree.
For the class of 2020, their timing could hardly be worse. Just a few months ago, they were set to graduate into a tight labour market filled with opportunity.
Now, their prospects are grim. The Canada Emergency Student Benefit – which pays out at least $1,250 a month – will tide over eligible students and recent graduates for a few months. Beyond that, the long-term impact of graduating into a recession could be devastating.
A 2012 study co-authored by University of Toronto economist Philip Oreopoulos tracked the long-term earnings impact on Canadian men who graduated in previous recessions. It found the cost “is substantial and unequal. Unlucky graduates suffer persistent earnings declines lasting 10 years. They start to work for lower paying employers and then partly recover through a gradual process of mobility toward better firms.”
Back in mid-March, as provinces were declaring states of emergency, economists at Canadian Imperial Bank of Commerce wrote the following: The eventual recovery would be “mostly a matter of epidemiology, not economics.”
Quebec is the most dramatic example. An epicentre of the COVID-19 outbreak, the province has suffered more infections and deaths than the rest of the provinces combined. It was also forced to put tighter restrictions on major industries than most other provinces did.
The effects are evident in the data. In just two months, Quebec went from having the lowest unemployment rate (4.5 per cent) in the country to the highest (17 per cent). The surge of unemployed is “likely not unrelated to the especially heavy challenges with the virus in that region,” Douglas Porter, chief economist at Bank of Montreal, wrote in a recent research note.
Moreover, the total number of hours worked in Quebec in April plunged 35 per cent from February, the largest provincial decline. Saskatchewan fared best, down 16 per cent.
As Quebec reopens its economy, the province is poised for a strong rebound in employment. But success hinges on how effectively it can curb virus transmission. Case in point: The provincial government has pushed back dates for reopening parts of the Montreal region, because it remains a hotbed of infection.
The smaller the company, the more likely it was to slash its payroll.
Employment at companies with fewer than 20 employees plunged more than 30 per cent from February to April, according to an analysis of Statscan data from the Brookfield Institute for Innovation + Entrepreneurship at Ryerson University in Toronto. By comparison, companies with 500 or more employees cut their work forces by 12 per cent.
The federal government has unveiled a slew of programs aimed at helping businesses survive the pandemic and retain workers. One program, the Canada Emergency Wage Subsidy, covers 75 per cent of wages for eligible companies, up to a maximum benefit of $847 a week per employee.
Because the program was launched in late April, it could very well lead to a spate of hiring that shows up in Statscan’s employment figures for May. Prime Minister Justin Trudeau said Wednesday that more than 120,000 employers have been approved for CEWS for nearly two million workers.
Looking forward, “in terms of small businesses, you have concerns about whether [the pandemic] will change the rate of new businesses starting,” said Viet Vu, economist at the Brookfield Institute. “Is it more likely that people are going to perceive entrepreneurship as a more risky thing?”
In April, Statscan’s official unemployment rate jumped to 13 per cent, just one-10th of a percentage point lower than a record high set in December, 1982. But some economists say that headline rate is ill suited to capture the full extent of labour disruptions. “The official unemployment rate of 13 per cent massively understates the degree of the shock,” Scotiabank’s Mr. Holt wrote to clients.
A wider view of affected workers is helpful during the pandemic. Statscan has several measures of unemployment. The headline rate includes people available for work and actively searching, on temporary layoff or starting work imminently.
Of course, given lockdown measures in place in April, many people didn’t bother searching for work because it was a pointless endeavour. Unless they were temporarily laid off or about to start a job, they were not considered unemployed.
But one of Statscan’s broader measures of unemployment, known as the R8 rate, jumped to 17.9 per cent in April, easily the highest on record. It includes the unemployed, discouraged job searchers, workers waiting for recall or replies, those starting jobs beyond the next four weeks and a portion of involuntary part-time workers.
As of April, about 1.5 million people were not in the labour force – that is, they weren’t employed or looking for jobs – but still wanted work, an increase of 1.1 million from February. Look for this figure to drop significantly in the months ahead as the hiring climate improves.
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