‘Horrifically swift’ job losses raise unemployment rate to staggering 13%
Virus decimates 2M positions in April; true scope of damage may be much worse
The Canadian economy lost two million jobs in April, an astonishing figure and, remarkably, one that might understate the damage caused so far by the coronavirus crisis, economists said.
Statistics Canada on Friday reported that the collapse in employment caused the jobless rate to spike to 13 per cent from 7.8 per cent in March, nearly matching the highest ever recorded in data that date to the mid-1970s. In all, about 15 per cent of the labour force is currently without work.
“Job losses have been horrifically swift since February,” Arlene Kish, an economist at IHS Markit, a data and research firm, said in a note to her clients.
The unemployment rate reached 13.1 per cent in December 1982, during a previous recession. Otherwise, the hiring statistics in April were unlike anything economists had ever seen. The devastation was equally dramatic in the United States, where 20.5 million people lost their jobs last month, while the unemployment rate soared to 14.7 per cent, making it the worst month for the labour market since the U.S. government began tracking data in 1939.
Canada’s jobless numbers could have been worse. The only thing keeping the current recession from turning into a depression is the hundreds of billions of dollars the federal government and the Bank of Canada have pushed into the economy since March to cushion the fall. Still, not even all that money can catch everyone.
“I will qualify for the wage subsidy, that’s all fine, but some of my employees do not want to come back because they are scared of getting sick,” Charles Khabouth, chief executive of Ink Entertainment, which employed 2,600 workers at bars, restaurants, clubs, and live events before the pandemic, said in an interview. “So what do I do? I had to let them go because all of my properties were closed. I only kept about 30 of my staff.”
In one superficial way, the April data were a positive surprise: Bay Street’s consensus forecast had predicted twice as many job losses. But that’s a thin silver lining. The devastation grows when you include people who are technically employed, but have lost most of their hours and those who have stopped seeking work because there is no work to be found.
The total number of “underemployed” Canadians in April was probably around four million, said Derek Holt, an economist at Bank of Nova Scotia.
“The traditional definition excludes these people from the labour force, but we are not in a normal situation,” said Parisa Mahboubi, an economist at the C.D. Howe Institute, a Toronto-based think-tank.
In April, almost 40 per cent of the labour force worked less than half their usual hours or not at all, according to Statcan; the same figure in February was 11.3 per cent, a contrast that perhaps paints a more accurate portrait of Canada’s current situation.
“In May, we will probably have in the neighbourhood of at least another one million people losing jobs,” said David Macdonald, an economist at the Canadian Centre for Policy Alternatives think-tank.
Bay Street’s forecast might have been off because economists have been using applications for the Canada Emergency Response Benefit (CERB) as a proxy for job losses.
Canadians who are unemployed, sick with COVID -19 and cannot go into work, have a family member who is sick with the virus, or who have lost a majority of their work hours are all eligible. To date, some 7.6 million people have applied for CERB, more than double the number of jobs lost in March and April.
The COVID-19 crisis struck workers in services industries first. Last month, the recession caught up with the “goods” sectors.
Almost all the jobs lost in April were temporary layoffs, according to Statcan, a glimmer of hope that the economy could bounce back once the lockdowns end.