OTTAWA – The Bank of Canada says workers felt optimistic about the job outlook, while employers felt the opposite in the weeks before COVID-19 shocked the Canadian economy.
The Survey of Consumer Expectations suggests that more people planned to look for a new job and expected to find something new quickly, while fewer people thought they would lose their job.
Household spending expectations have continued to climb faster than expectations for wage growth, which the bank says suggests that consumers in mid-February did not become more cautious about spending.
Then COVID-19 struck.
In the past two weeks, more than two million people have applied for EI benefits, a dramatic spike compared to what the program normally sees.
And starting today, Canadians who are not eligible for employment insurance will be able to apply for a new $ 2,000 a month emergency benefit that the federal government plans to cost $ 24 billion.
The outlook for the remainder of the year fell just as dramatically just a few weeks ago, and Bank of Canada surveys today provide a pre-pandemic picture of consumers and businesses.
Results from the Business Outlook Survey suggest that the business climate has softened in most regions before the pandemic intensified.
Much of the feeling of corporate weakness came from the oil-producing regions of the country, where companies were generally less optimistic, shrinking on capital spending and hiring plans as they watched the price of oil fall.
Companies have told the central bank that they expect the economic shock from falling oil prices to be worse than that which hit the sector in 2015 and the economic crisis of 2008. As a data point, capital spending was reduced by 30% compared to 2019.
The reason, says the bank, is due to the fear that financing will become more difficult to find for companies which also anticipated “a trough in the sector rather than a negative shock”.
The survey also suggests that oil companies were planning few layoffs unless low oil prices persist for a longer period of time.
The belief was that the benchmark price for crude oil, known as West Texas Intermediate, would be between US $ 30 and US $ 35 per barrel. The price to start the week was closer to US $ 28 per barrel.
By mid-March, restaurants, hotels and other service industries had seen their sales collapse, closed or expected soon, and “drastically lay off staff or cut working hours in accordance with operations.” Others, the bank noted, are moving to food delivery and online sales to find new ways to make money.
Manufacturers expected temporary closings and lower sales for troubled customers.
Food retailers and related transportation companies saw sales reach “unprecedented levels” when workers had to stay at home.
This report from The Canadian Press was first published on April 6, 2020.