Fall uncertainty clouds optimism
The Canadian employment picture brightened in June, with employers planning to keep staff and even hire after the harrowing effects of efforts to contain the fast-spreading novel coronavirus in the spring, according to a survey released Tuesday by Statistics Canada.
However, that bright spot is clouded by uncertainty about how successfully the economy will run through the fall and whether caution and possible missteps will hamper the success of businesses that re-open.
Nearly two-thirds of businesses surveyed by Statistics Canada said they expect to keep the number of employees the same over the next three months, while 15 per cent expect to increase their hiring. Even more employers in the food services and manufacturing sectors expect to bring in more workers, at 24.4 per cent and 23.9 per cent, respectively. At the same time, only 8.6 per cent of employers expect to reduce workforces over the next three months.
Aver y Shenfeld, chief economist at CIBC Capital Markets, said it is encouraging that the gap between those planning to increase and reduce staff is even greater among large corporations.
Still, he noted that many of the firms surveyed also warned of layoffs within six months if their operations don’t improve, signalling “a slower pace of rehiring down the road.”
About one- fifth of businesses reported that current revenue and expenditure levels would not be sustainable for the next six months, causing them to consider “further staffing actions, closure or bankruptcy.”
The percentage of businesses in this position rose to more than a third in the hard- hit accommodation and food services sector.
The pandemic response took a heavy toll on Canadian businesses, with more than half reporting that revenue in April was down 30 per cent or more compared to the same month in 2019. More than one-third of businesses said revenue was down 50 per cent or more, Statistics Canada said.
Nearly 40 per cent of businesses reported reducing staff hours or shifts due to the pandemic, while slightly more than 28 per cent laid off staff. Of the businesses that laid off at least one employee, more than 60 per cent said they let go at least half their workforce.
Economic recovery will vary depending on the sector, according to tax, audit and consultancy firm RSM Canada, which released a separate report Tuesday.
Alex Kotsopoulos, a partner at RSM Canada, said the overall Canadian economy is performing better than predicted following a slow and staggered reopening in the provinces following March shutdowns.
“However, it’s likely that provinces with a greater proportion of their economy dedicated to areas such as natural resources will lag behind others,” he said, adding that “additional investment or focus may be needed to support these areas.”
Unlike sectors such as fi n a n c e and e d u c at i o n , which lend themselves to continued work- from- home adjustments, few jobs in resources extraction, retail, manufacturing, and agricultural can be done remotely.
RSM officials suggested government should focus on helping Canada’s industrial sector, which was under stress before mandated shutdowns of non-essential businesses to control the spread of COVID-19.
“The pandemic has certainly dealt a tough blow to Canada’s industrial sector — an area already struggling back in 2019 as a result of the ongoing trade war between the U. S. and China,” said Joe Brusuelas, chief economist with RSM US LLP.
“Despite some promising short- term economic indicators, and the Bank of Canada’s steps to accommodate stimulus measures, it’s imperative that the authorities make prudent investments to keep industrial recovery moving in the right direction and look to boost trade efforts as much as possible,” he said.
The Statistics Canada survey revealed that nearly twothirds of businesses were approved for funding from government programs or credit from other providers as a result of the COVID-19 pandemic. In the accommodation and food sector, this figure rose to 84.2 per cent of businesses, while three-quarters of businesses in the arts, entertainment, and recreation sector received such funding.
Slightly more than 43 per cent of businesses reported that they had applied for and were approved for the Canada Emergency Business Account, which provides qualifying businesses with a loan of up to $40,000.
Meanwhile, 22.6 per cent of businesses were approved for the Canada Emergency Wage Subsidy, which provides a subsidy to support businesses in paying wages. Of those, more than half said the subsidy allowed them to hire back 30 per cent or more of their workforce. Almost a quarter said they could hire back their entire workforce.
Nearly a quarter of businesses that make rent or mortgage payments had those payments deferred, according to Statistics Canada, while 5.7 per cent of businesses had their request to defer payments rejected.