Jobs gains bring Canada close to levels before pandemic struck

Restaurants and hotels lead hiring surge as unemployment rate decreases to 7.1%

The recovery from the COVID-19 recession marches on.

Employers added 90,000 jobs in August, a strong increase that dropped the jobless rate to 7.1 per cent, the lowest since the eve of the pandemic, Statistics Canada reported on Friday.

The new figures beat Bay Street forecasters' expectations that the economy would add about 68,000 jobs, according to the median estimate of a Bloomberg survey of economists.

The hiring surge was led by restaurants and hotels, which were released from months of strict health restrictions that provinces implemented to curb the third wave of COVID-19 infections.

The land border with the U.S. also opened to non-essential travellers last month, boosting tourism, Statistics Canada said.

Fresh evidence that the recovery remains on track supports the Bank of Canada's decision to look past disappointing economic growth this spring and stick to a path that could see it further reduce monetary stimulus as soon as next month.

The report could also play out on the campaign trail, where Liberal Leader Justin Trudeau is playing catch up after surrendering a big lead in the polls. The latest hiring numbers left employment 156,000 positions short of pre-pandemic levels, an impressive rebound by historical standards that Trudeau could use as evidence that his government managed the crisis effectively.

“A solid report which will act as a bit of an antidote to last week's sour GDP result,” Douglas Porter, chief economist at Bank of Montreal, said in a note to clients.

“On balance, the continued decent gains in employment suggest that the recovery was still grinding forward in late summer even in the face of the budding fourth wave and ongoing supply bottlenecks.”

Most of the increases last month were in full-time work, which expanded by 69,000 positions, with service-producing industries capturing most of the gain.

Overall, service providers added 93,000 positions, mostly in food and accommodation, to bring the service sector as a whole back to pre-pandemic levels.

Liberal candidate Chrystia Freeland took timeout from campaigning to note on Twitter that 95 per cent of the jobs lost during the COVID-19 crisis have now been returned, compared with 76 per cent in the United States.

She also used the hiring numbers as an opportunity to state that the economy was getting closer to her government's goal of creating one million jobs. The campaign will be over before the September Labour Force Survey is released. Economists are unsure that report will be as impressive as the August tally.

Hotels and restaurants eliminated some 600,000 positions in March and April of 2020, and the industry still needs to add more than 150,000 jobs to get back to where it was before the pandemic. That could be difficult.

The Bank of Canada warned this week that the fourth wave of COVID-19 could affect the recovery, throwing into question whether the high-touch industries will recover fully as expected.

A survey this week by lobbying group Restaurants Canada paints a picture of the dire situation for many eateries. Four-fifths of respondents said they were finding it difficult to hire kitchen staff and 67 per cent were having trouble bringing on waiters. The most recent job vacancy data pegged the sector at more than 129,000 vacancies in June.

“We're starting line cooks with almost no experience at $15 now and we're hiring cooks with experience for far more money than that because you just can't find good people with a good work ethic to step into the position,” said Steve McLean, an operations manager at Darrell's Restaurant, a burger joint in Halifax, who had managed to fill only two of nine vacancies since the beginning of August.

Darrell's closed on Labour Day, typically one of the busiest days of the year, to give existing staff a break. McLean said the restaurant will now close on Wednesdays until he recruits more workers.

Labour shortages have captured the attention of the central bank. “We have all seen help wanted signs at restaurants and stores,” Bank of Canada governor Tiff Macklem said in a speech on Thursday. “It is critical that we understand how Canada's labour market is recovering. Bank staff are studying this process carefully to help us assess what it means for overall labour slack.”

At August's pace, employment could return to where it was in February 2020 before the winter.

But other gauges suggest the economy will need more time to fully heal.

For example, the jobless rate was around 5.5 per cent at the end of 2019 and Macklem said he is willing to risk a little inflation to get it back to that level.

The underutilization rate, which includes workers who have stopped looking for jobs or are working less than usual, also remains elevated at 14.2 per cent compared with 11.4 per cent on the eve of the recession.

“A rapid recovery in the labour market assumes that Canada's world-leading vaccination rates can push back the Delta variant and allow additional employees to reintegrate COVID-19-affected sectors,” National Bank economists Matthieu Arsenault and Kyle Dahms said in a report on the latest hiring numbers.