Food services especially vulnerable during 2nd wave

While Canadian employment had mounted an impressive recovery over the summer and autumn, with 378,00 job gains in September and 78,000 in October, the next few months could see job growth suffer, especially in the accommodation and food sector.

Small business owners, notably in the restaurants, food, accommodation and retail space, are expected to be hardest hit by the second wave as many do not have the financial strength to sustain two lockdowns in less than a year.

“The second round of restrictions that began in October look set to subtract 150,000 to 200,000 from accommodation and food service employment compared to September,” Stephen Brown, senior Canada economist at Capital Economics, said in an interview. “For the whole year, if my expectations for November and December prove correct, the drop in A&F (accommodation and food) employment will be nearer 400,000.”

The accommodation and food segment employed 993,100 workers at the end of October, Statistics Canada data shows.

In a report, Brown wrote that despite job gains in other sectors, Capital Economics' forecast for a renewed fall in employment in December implies 670,000 people will be out of work compared to a year earlier.

“The latest leg-down will not be captured in the November LFS (Labour Force Survey), so it will probably show a modest rise in total employment. But amid signs that even more restrictions are on the way, we expect the December LFS to show a decline in overall employment of 150,000,” Brown wrote.

The lockdowns will also take a toll on economic growth.

“We've assumed that the more stringent measures seen — such as shutting indoor dining and personal services — will carve roughly 0.5 per cent per week from economic activity,” BMO senior economist Robert Kavcic and economist Shelly Kaushik said in a note. The estimate was published before Alberta announced its lockdown measures.

“All told, we judge that the measures that have been rolling out since early October could clip Canadian quarterly growth by as much as 5 per cent a.r., leaving growth as low as zero for Q4,” the BMO economists wrote, adding that the lockdowns could shave off 0.2 per cent from national GDP for the full year.

BMO expects Canadian GDP to decline 5.7 per cent this year.

Earlier this week, the federal government began its new commercial rent-relief program that would allow businesses struggling to pay their bills to start applying for support.

Businesses will also closely watch the federal fiscal update on Nov. 30 to see if there are more measures coming, despite the federal deficit rising to $343.2 billion.

“The second wave of COVID-related restrictions is now upon us, but the economic impact will likely be much less harsh than in the spring,” BMO economists Kavcic and Kaushik wrote, noting that there will be sectors and regions that will struggle.