The (sort of) good news behind the epic job loss figures in Canada


Months passed before a consensus was formed that the Great Recession was even an economic slowdown. The data slowly deteriorated, at least until Lehman Brothers Holdings Inc. filed for bankruptcy in September 2008. This left time for ambiguity.

The coronavirus crisis came more like an atomic explosion than a slow-burning fuse. But at least we can remove all the qualifiers about what’s going on in the economy.

On April 9, Statistics Canada reported that employment fell by more than a million jobs in March, wiping out all the jobs created since the fall of 2016. The collapse was eight times greater than the previous record loss employment in one month, which was 124,800 in January 2009. It was also greater than the overall decline in employment during the downturns of 2008/09, 1990/92 and 1980/81 .

The unemployment rate, which, at 5.6% in February, was close to a historic low, reached 7.8%, the highest rate since October 2010. Hours worked, an important driver of economic production , plunged 15%, the biggest drop in records dating back to 1976. And, to keep us from getting away from what really matters, the number of people who lost hours in March because they were sick at 675,000, an increase of some 336,000.

“The sudden drop in employment observed in March is expected to have a significant effect on the performance of the Canadian economy in the coming months,” said Statistics Canada. The sighting is more serious than it seems, as the agency almost never runs the risk of interpreting its own figures. To understand what this really means, let’s turn to Bay Street: “Canada is now in a deep recession,” said Krishen Rangasamy, economist at National Bank Financial.

Now what? We are waiting and trying to remember that all of these terrifying graphics that economists are circulating on Twitter don’t tell us anything that we didn’t already know. Smart people keep writing and saying things like “for at least the next two years (Canada) will have little to do with a functioning economy.”

As far as I know, pessimism is rooted in the extraordinary nature of the recession, and not in a lucid assessment of real conditions. Life may never return to normal, but that does not herald years of hardship. The most likely scenario is that economies will begin to reopen by the end of spring and start to climb again in the second half.

This is how investors see it. The S & P / TSX composite index rose after Statistics Canada released its first major count of the coronavirus crisis, with investors betting that the flattening curve of new cases reported in Europe and the United States shows that the recession may be brutal, but it will be short.

“There is a light at the end of the (short) tunnel as the new number of COVID-19 cases on the planet is improving, a potential leading indicator of a positive recovery in economic activity in the weeks and months to come, ”Sébastien Lavoie, chief economist at Laurentian Bank Securities, said in a note to clients.

China is returning to normal and Austria, Denmark, the Czech Republic and Norway have all announced plans to ease lock restrictions this month. “Until certain restrictions are lifted in Canada, several financial bridges and tax breaks announced by governments will help support revenues and ease financial stress,” said Lavoie.

This last part is important. The advantage of seeing an epic collapse take place in real time is that policymakers and politicians do not have time to ruminate and pontificate what to do. The silver medal around the employment numbers is that the epic decline will be met with a public rescue of historic proportions.

The Bank of Canada has already cut interest rates to zero, and when that is not enough, it has started to create billions of dollars to buy bonds. The federal government has promised to spend more than $ 100 billion on various measures, including a subsidy that will cover 75% of the wages of businesses in greatest difficulty. He also promised tax deferrals and low-interest loans worth tens of billions of dollars more.

None of this will fully compensate for the economic loss from the forced closure of entire industries overnight, or guarantee that the economy will return to what it was in February. But, unlike past recessions, the blow to households and businesses will be amortized almost immediately. Prime Minister Justin Trudeau’s rescue efforts have been hesitant, but he will still have put more foam on the track than any of his predecessors.

It should also be borne in mind that the economy still has a pulse. Simon De Baene, co-founder and CEO of Groupe GSoft Inc., a Montreal-based enterprise software publisher, told me last week that he is still hiring. The transition to a digital economy will not be slowed down by the coronavirus; it could even be accelerated.

Retailers like Loblaw Cos. Inc. and Dollarama Inc. have granted temporary increases to their front line employees. And companies involved in agriculture and other resource industries actually added workers in March, said Statistics Canada.

“Our order book is very solid,” said Chuck Magro, general manager of Nutrien Ltd., the potash miner in Saskatoon, last week. “All of our operations are operating according to our original plan,” with the exception of the introduction of social distance and other security measures, he said. “We have not seen any major cuts in production. “

A fertilizer company is not representative of the entire Canadian economy. But Nutrien recalls that some foundations remain in place. The 2020 crop is about to be sown at the very least.

Financial Post

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