Are we prepared for the fiscal storm?

Unemployment rate will top 13 per cent, worst since WWII

How many of the two million Canadians who have been thrown out of work started the month of March worrying about their employment prospects? Probably not many.

Carla Qualtrough, the employment minister, said Sunday that 1.6 million people have applied for Employment Insurance in recent weeks — government sources suggest the current number is closer to two million, which will take Canada’s unemployment rate north of 13 per cent, the highest it has been in the postwar period.

Life is fragile, certainty an illusion.

The constant churn of harrowing news is almost too much — nine deaths in one nursing home in Bobcaygeon, Ont., alone.

But amid the anguish, there are grounds for hope. Ben Bernanke, the former chairman of the U.S. Federal Reserve, said he believes the current crisis is more like a “major snowstorm” than the Great Depression, which took 12 years to play out. He said he sees a “very sharp” recession, followed by a “fairly quick” rebound.

The response of the federal government and the Bank of Canada has been designed with that timeline in mind — a bridge for individuals and businesses to better times.

Justin Trudeau clarified the eligibility rules around the emergency wage subsidy on Monday — a program that will apply to all businesses, large or small, who have seen a 30 per cent drop in revenue because of COVID-19. Employees will see 75 per cent of their wages covered, up to $58,700 in annual earnings for three months. The government now has announced nearly $120 billion in direct support for individuals and businesses, including the $2,000 a month emergency benefit relief for those who don’t qualify for EI, and another $85 billion in deferred taxes.

The Bank of Canada has made three interest rate cuts and provided liquidity support to financial institutions.

Further help for the airline and energy sector is expected — “it’s something we are definitely focused on,” Chrystia Freeland, the deputy prime minister, said in Monday’s briefing.

Trudeau provoked the ire of Conservatives and fiscally-conservative Liberals when he claimed credit for a balance sheet that should be able to endure the massive deficit spending to which he is now committing the country.

“We’ve been making sure we have money set aside for a rainy day. Well, it’s raining and we are now able to invest in Canadians,” said the prime minister, whose government was on course to record a $27-billion deficit even before the COVID crisis hit.

But the Liberal government has taken measures that should help ease financial anxieties in the short term. That dread is real, according to the MNP Consumer Debt Index, which showed a 10-point jump in concerns about debt levels — nearly half of Canadians are now on the brink of insolvency, $200 or less from not being able to meet their debt obligations.

Personal and business bankruptcies can likely be held at bay if the immediate crisis passes.

But the focus now shifts to another front — from parliament to the intensive care units.

A successful return to near-normalcy depends on a public health solution. No fiscal or monetary policy will work if people don’t feel confident about going back to work.

As Bank of Canada governor Stephen Poloz said in his news conference last Friday: “We need to stop the clock, allow our medical experts to combat the virus, and then restart the economy afterward.”

Restoring confidence is going to mean more readily-available protective gear and widespread testing to provide reassurance to workers, and to allow authorities to isolate areas where the virus flares up.

By international standards, Canada’s testing regime is respectable — 589 tests per 100,000 people, by my calculation based on Monday’s number of 221,628 tests. But it is patchy, with Ontario in particular lagging.

Canada is trending much closer to Germany, with its 0.9 per cent fatality rate, than Italy, which saw an 11 per cent death rate. However, Germany credits its broad testing strategy — close to one million tests in total — for being able to break the chain of infections.

Canada falls far short of that level, not to mention having nowhere near as many ventilators or intensive care beds as the Germans.

Theresa Tam, the chief medical officer, reported Canada has 6,671 cases and 66 deaths as of Monday — with a hospitalization rates of seven per cent. That may prove some grounds for optimism — the rate is around half what was expected by the provinces, according to Quebec’s chief doctor, Horacio Arruda.

Yet things are likely to get worse, much worse, before they get better.

There has been a surge in hospitalizations, admissions and deaths in recent days. The question is: can the health system weather an April blizzard likely to be of unprecedented ferocity?

If the thin white line can hold, life might begin to seem a little less fragile.