Jobless rate may surpass 11% by April: economists
Canada’s unemployment rate may already have climbed to 10 per cent — and is heading even higher — driven by an “exodus of jobs” as global economies grind to a halt in an effort to slow the spread of the novel coronavirus.
Economists at Royal Bank of Canada said Thursday they expect the rate to peak “north of 11 per cent,” perhaps as early as April.
Separately, Avery Shenfeld, chief economist at CIBC Capital Markets, told the Financial Post that the jobless rate could nearly double by next month from the relative calm of February’s rate of 5.6 per cent.
“That exodus of jobs will mirror the emptied out restaurants, airports and downtown streets that we can see with our own eyes today,” Shenfeld said.
Some half-a-million Canadians applied for unemployment benefits last week alone, according to Prime Minister Justin Trudeau, and, as the number of business required to be shuttered under federal and provincial government orders grew this week, economists scrambled to make downward revisions to what were already sombre outlooks for employment.
“Many of the service-sector industries that typically act as an ‘economic buffer’ in a recession will be dramatically impacted by social distancing,” the RBC economists said in a note Thursday, in reference to guidelines, and in some places orders, to refrain from social gatherings and even contact between two people at a distance of closer than two metres.
“The drop in service sector activity and the oil-price shock, combined with ripples from slower global demand and supply-chain disruptions that will hit the industrial sector, means we are headed for a period of unprecedented softness in economic activity,” the economists wrote, pointing to the rippling impact of the global pandemic, which has seized economies from Asia, to Europe, to North America.
Agathe Demarais, global forecasting director at The Economist Intelligence Unit, said the number of people applying for unemployment benefits in Canada last week was “staggering,” and suggested the jobless rate in this country is likely to “shoot up to around 10 per cent or more” in the second quarter. For the year, she is projecting an unemployment rate of “over eight per cent” for this country.
At the top of a forecast from economists at Toronto-dominion Bank on Thursday, the bank warned that updates would be published more frequently than usual due to “rapid changes in the economic and policy environment.”
TD economist Sohaib Shahid said the “rolling” disruptions caused by COVID-19 will crimp growth, demand and global trade, making a rebound unlikely before the latter half of 2021, even as economic activity has begun to resume in China and South Korea, where cases of COVID-19 appear to be declining. Data from the United Kingdom and Australia has also been “dismal,” the economists wrote.
As the number of those infected with the virus continues to grow across North America, in the United Kingdom, parts of Europe, and Australia, along with efforts to contain it, Canada is not unique in the scramble by prognosticators to recalibrate forecasts.
On Thursday, the U.S. Labor Department reported jobless claims for the week ending March 21 rose sharply, reaching nearly 3.3 million — more than double the forecast 1.5 million. And the United Nation’s International Labour Organization is now reportedly considering revising its estimate from just over a week ago that the pandemic would leave nearly 25 million jobless around the world.
The U.S. has already shed 38 per cent of the jobs lost over three years during the financial crisis that wound down a little over a decade ago, according to a report published Thursday by Manulife Investment Management.
“No doubt the bulk of the job losses came from the retail, hospitality, travel and restaurant industries,” the Manulife report said. “And it will no doubt get worse over the next two weeks.