Job market awful, will get worse
6.82M Total unique applicants for Canada Emergency Response Benefit March 15 to April 21 Total dollar value of CERB payments $21.3B
It is perhaps an understatement to call the unemployment picture across Canada grim.
Roughly five per cent of the Canadian labour force, or one million people, are now out of work because of COVID-19. A further 10 per cent worked less than half their usual hours, despite technically remaining employed.
But the most remarkable thing about these statistics is that they represent just two weeks worth of data showing the devastation COVID-19 has wrought on the employment landscape. The situation can get markedly worse, and likely will.
Think the labour market is bad? You ain’t seen nothing yet
It is perhaps an understatement to call the unemployment picture across Canada grim. Roughly five per cent of the Canadian labour force, or one million people, are now out of work because of COVID-19. A further 10 per cent worked less than half of their usual hours, none in some cases, despite technically remaining employed. In Toronto — which has experienced an unprecedented employment boom over the past five years — at least 25 per cent of all jobs have now been wiped out.
But the most remarkable thing about these statistics is that they represent just two weeks worth of data showing the devastation COVID-19 has wrought on the employment landscape. The situation can get markedly worse, and likely will.
A fuller portrait of the severity of this unemployment crisis will be revealed May 8, when Statistics Canada releases new figures tracking jobs lost by mid- April. The only real- time indication a historic blitzkrieg of job losses is happening is the number of people who have filed for the Canada Emergency Response Benefit: almost seven million to date, more than a third of the number of Canadians who had a job in mid-march.
“The huge amount of support the government is providing has got some blood flowing through the body politic,” said Armine Yalnizyan, economist and Atkinson Foundation fellow on the Future of Workers. “But the longer this goes on, the slower the blood circulates. We might then start seeing amputations.”
How and where these amputations might take place remains to be seen, but the job losses so far have hammered specific sectors such as hospitality and accommodation, food services, retail and transportation. They have also disproportionately affected women and lower-wage workers.
“There’s a pretty clear relationship between earnings and the likelihood you will lose your job,” said David Macdonald, senior economist at the Canadian Centre for Policy Alternatives ( CCPA). “A large part of that has to do with the specificity of the non-essential businesses and their closures.”
For example, half a million people in the accommodation and food- service sectors lost their jobs or the majority of their hours, and another 400,000 did in retail, according to an analysis of Statistics Canada employment data by the CCPA. The front- line workers in those sectors often tend to be minimum-wage earners, such as servers at restaurants or re
A LARGE PART OF THAT HAS TO DO WITH SPECIFICITY OF THE NON-ESSENTIAL BUSINESSES.
tail store employees.
Macdonald’s analysis shows that between February and March, a third of all jobs paying less than $ 14 an hour were either eliminated or had their working hours decrease by at least half.
“But if you look at the highest-earning decile of our labour force, people earning over $ 48 per hour, only five per cent of them lost their jobs or the majority of their hours,” he said. “The job losses are clearly focused on the lower end of the earning spectrum.”
In a recent note, economist David Rosenberg warned that this income disparity could have far- reaching effects.
“First, from an aggregate demand standpoint, these low- income people spend most of what they earn,” he said. “Second, it will not go unrecognized from a political standpoint how the ‘ have- nots’ in this crisis fell even further behind the ‘ haves.’ This will have a future impact on taxation policy; if not, we can expect some sort of civil unrest.”
The job losses are also more concentrated among women, 20 per cent of whom have lost their jobs versus 13 per cent of men. Most of the positions more often filled by women than men, such as catering, social work and cashiering, have almost been wiped out, at least temporarily due to the shutdown.
“In previous recessions, ones that were caused by, say, a change in commodity prices, men were much more likely to get hit,” Macdonald said. “Women’s jobs have traditionally been more service-oriented and are historically more likely to weather recessions.”
The last time Canada was in the depths of an unemployment crisis was 2009, in the early aftermath of the Great Recession, when the rate reached a peak of 8.7 per cent. But the Canadian economy 12 years ago was a more goods- oriented one and the service sector wasn’t as large as it is now.
“Much of the goods sector, like mining and manufacturing, is very capital intensive. So when you have a recession, you take a bigger hit to GDP, and less so to employment, ” said Pedro Antunes, chief economist at the Conference Board of Canada. “A crisis that hits the service side of the economy is one that hits labour the most.”
Employment in professional services has increased by a whopping 50 per cent since the 2009- 09 financial crisis, but there hasn’t been much job growth in resource extraction since 2015, due primarily to oil price declines. And even though manufacturing employment has been steady for a decade, Canada had at least a half- million more manufacturing jobs in the early 2000s than it does now.
The gravity of the current unemployment crisis can be illustrated by peak-to-trough employment data from 12 years ago.
“From the time the 200809 recession started till it ended, our peak- to- trough employment dropped by two per cent. That’s a pretty light loss in employment,” Antunes said. “Right now, just in March, we’ve already seen a five per cent dip and our forecasts say that will quickly climb to 15 per cent. We have definitely not seen the full brunt of the losses.”
So far, the professional class has, comparatively, been spared. But Macdonald said the notion that job security and permanency of employment — both more common among higher- income earners — will hold up against COVID-19 is unlikely.
“Over time, the professional class will start being affected as well. I would expect job losses to climb further up in the value chain,” he said. “If you look at food and accommodation, the front line was hit hard, but further up the chain, for the management folks in the admin side, the impact wasn’t as large.”
Major law firms and accounting firms have already indicated an incoming revenue crisis, compelling staff to either take pay cuts or volunteer for reduced salaries in exchange for fewer hours.
“Who are the clients they supply services to, and have those clients seen their revenues dry up? How much of the equity that COVID-19 has erased will result in some investment firms closing down? Will the banks start laying people off as they see profits decline? These are some of the things that we don’t know yet.” Yalnizyan said.
Since Statistics Canada’s first post-coronavirus labour force survey was released almost three weeks ago, more factories — specifically those making goods deemed non- essential such as consumer durables and vehicles — have been forced into mandated shutdowns, leading to thousands of furloughed or laid-off workers.
“If our pocketbooks take a real beating, if we lose purchasing power for too long, there will be all sorts of durable goods, big ticket items, that people won’t be buying: cars, fridges, etc.,” Yalnizyan said.
Parisa Mahboubi, a labour economist at the C. D. Howe Institute, said it is too early to speculate how bad the employment situation is going to get in the short term, let alone what might happen six months from now.
“The only source of data we have is the latest labour force survey from Statscan,” she said. “We need to be very careful on how we interpret the employment picture.”
For one thing, Mahboubi said, COVID- 19 makes it hard to tell who is actually unemployed, or what jobs will be available for those wanting to return to the workforce. Will a receptionist at a dentist’s office, for example, wait to get her job back, or seek employment in an Amazon warehouse or grocery store?
“Not all sectors will recover at the same rate, or at the same time,” she said. “–— There are going to be a lot more complications going forward.”
Yalnizyan said one possible way to think about how jobs will recover is to look at it in the reverse order of what was shut down.
“Schools shut down first, so school- related activities and schools will probably open first,” she said. “Retail shops might open next, but malls might take some time.”
Of course, there is also the looming question of what the job market will even look like when the economy reopens.
On the one hand, Antunes said, a decline in immigration — one of the biggest reasons why Canada’s labour force has been growing — due to the virus might absorb some of the shock of lost jobs, since there will be less competition for jobs once the economy reopens.
On the other hand, the makeup of the labour market might change in that there are going to be people joining the essential workforce, because they have been displaced out of their current industries, who might choose to remain in those jobs, at least in the near term.
“Going into this crisis, the labour market was in very good shape. What we might see coming out of this crisis is a very different labour market,” Antunes said. “But we have never really shut down the economy like this and turned it back on, so really, nobody knows how this will play out.”
NOT ALL SECTORS WILL RECOVER AT THE SAME RATE, OR AT THE SAME TIME.