LABOUR MARKET
BOC boss issues a warning
It seemed fitting that Bank of Canada governor Tiff Macklem chose Alberta as the place to deliver a speech this week about the punishing effect of the pandemic on Canadian workers.
Few large cities in the country have struggled as much as Calgary and Edmonton have with long-term unemployment recently — because of layoffs in the oilpatch and now the hit to the labour market from COVID -19.
Macklem used the opportunity to highlight the long road ahead to get Canada's economy fully back into gear after the pandemic, and the importance of making sure workers in all areas take part in the recovery.
“Albertans have been especially hard hit, facing the double blow of lockdowns and low oil prices,” he told the Calgary and Edmonton chambers of commerce Tuesday in an online address.
“With Alberta and much of the rest of Canada emerging from the latest round of containment measures, we expect a solid rebound in the immediate months ahead . . . Nevertheless, it will take some time before we see a complete economic recovery.”
Heading into 2020, the country's economy was growing and the national unemployment rate was near 40-year lows, although Alberta lagged behind due to chronic energy sector struggles.
About three million jobs were suddenly lost due to lockdowns in the early months of the pandemic.
Employment gains occurred last summer and fall with a gradual reopening of the economy, erasing about 80 per cent of the earlier losses.
Today, with the second wave of the virus beginning to abate and vaccination efforts gearing up, the country is still down more than 850,000 jobs.
These losses have disproportionately affected low-wage workers, particularly women and Canadians under the age of 25, while hammering certain sectors such as tourism, arts and entertainment, accommodation, food services and recreation.
More than 500,000 Canadians have been actively searching for a job for more than 26 weeks, the highest level reported in almost three decades, he told the audience.
As economies reopen and COVID-19 vaccinations continue, “we should see some reversal of the pandemic's very uneven impact in the labour market,” he said, but later added: “We are not going back to the same economy we had before.”
While digitization and automation continue to transform the job market, this phenomenon of long-term unemployment will require a concerted effort from businesses, schools and governments to retrain workers for positions in the new economy.
The effect of such labour market scarring often means people who've been out of the workforce become discouraged and stop searching for a job.
“It has enduring consequences and that clearly is very harmful for the individuals involved. It is also harmful for the economy because we are losing productive workers, we are losing productive capacity in our economy,” Macklem said in an interview Wednesday.
“From the Bank of Canada's perspective … as we take decisions, it means there is going to be a need for monetary stimulus for a considerable period to minimize this scarring and get these people back to work.”
The issue of longer-term unemployment has dogged Alberta since the 2016 recession after oil prices cratered.
While the situation improved in the ensuing years, it deteriorated after the pandemic struck.
As of January, the average number of weeks Albertans were unemployed climbed to 18, above the national average of 15 — and the highest provincial levels reported since at least the 1990s, according to data from University of Calgary economist Trevor Tombe.
The number of Albertans without a job for six months or more topped 60,000 during the last recession; it is now sitting around 85,000.
Think about that figure for a moment.
It means almost one-third of all unemployed Albertans haven't had a job for at least six months, a group now larger than the entire population of Grande Prairie or Medicine Hat.
It's the highest such percentage in the country. During good economic times, that figure is closer to five per cent, Tombe noted.
“Workers being displaced from sectors (are) having a really hard time finding suitable employment in other sectors,” he said.
“And that matters because the longer you are unemployed, the harder it is to get employed.”
University of Alberta economist Joseph Marchand said the issue of young Canadians being without a paycheque for many months is a concern, noting if workers who've recently graduated struggle to enter the labour market, it can crimp their lifetime earnings.
Some experienced employees will create their own jobs and form businesses during such periods, but he believes retraining efforts will be needed for workers who are unable to pivot easily to other areas.
“There's room for government funding at both the federal and provincial levels to do those things,” Marchand said.
Coming into the pandemic, Alberta's economy was on a weaker footing than other parts of Canada.
The unemployment rate last February lagged the rest of the country, sitting at 7.2 per cent — well above the national rate at 5.6 per cent — and it remains higher than the Canadian average.
Alberta suffered the largest economic contraction last year and trailed other provinces in the early stages of the recovery. Some experts have suggested the province will continue to fall behind the pack coming out of the downturn.
Macklem noted Alberta has seen drilling activity pick up and there have been some job gains in the energy sector recently. Benchmark U.S. oil prices jumped above US$63 a barrel on Wednesday, essentially returning to PRE-COVID levels.
There has also been some momentum in diversifying the economy, the agricultural sector has performed well and the province has a highly educated workforce.
“Keep in mind that the Alberta economy coming into the pandemic was not quite as strong as the average of Canada,” Macklem said.
“There certainly is a risk it takes longer to get back to full employment and a full recovery than the rest of Canada, but oil prices have come a long way back,” he said.
“So there's every reason to believe it will share in the recovery and it may take longer, but maybe Alberta catches up. We'll see.”