COVID-19 expected to bring unemployment of 5% to 85% — what does that mean for Canada?
As the days and weeks go by, the numbers illustrating how paralyzed the country’s economy has become because of the coronavirus pandemic are getting bigger.
One of those figures arrived Tuesday, when Alberta’s premier, Jason Kenney, unveiled projections for the province’s unemployment rate on pace to reach 25 per cent.
It’s a shocking figure in a country accustomed to single-digit unemployment, but that’s what happens in a pandemic when a country deliberately shuts down its economy. The situation is unprecedented, and records will no doubt be broken.
When faced with these daunting figures, though, the most important aspect is how long the situation lasts.
Looking at the past year, the national economy and job market were relatively healthy. In February, the country’s unemployment rate was 5.6 per cent, and 245,000 jobs had been created in the previous 12 months. In Alberta, the jobless rate was 7.2 per cent.
WATCH | Federal finance minister unveils easier revenue tests for Canadian businesses to access financial aid:
Morneau unveils easier revenue tests for Canadian businesses to access financial aid
Federal Finance Minister Bill Morneau spoke to reporters on Wednesday 2:42
Economists suggest Canada’s unemployment rate right now is likely around 20 per cent. Statistics Canada will release some data on Thursday on the jobs front, but it will only provide a glimpse since the survey merely reflects the period up to mid-March.
The economic situation continues to be volatile as businesses and governments adapt to conditions that can change daily.
Air Canada, which operates in one of the hardest-hit sectors of the economy, is a good example. On March 30, the airline announced layoffs for 16,500 employees, but then on Wednesday, it said it would re-hire all of them.
Alberta hit hard
Alberta is likely going to be the hardest-hit province in the coming months because it’s hampered not only by the pandemic but also by record low oil prices.
Manitoba’s premier said Wednesday he expects his province will fare better economically than Alberta.
In Banff, the unemployment rate is believed to be about 85 per cent, a baffling situation considering the mountain resort community typically has “Help Wanted” signs hanging in the front window of just about every store, hotel and restaurant.
Alberta will easily surpass and possibly double the previous unemployment record, which was 12.4 per cent in 1984.
The unemployment rate might not actually hit Kenney’s forecast of 25 per cent — or the province might far exceed it.
“It’s sadly realistic,” said Charles St-Arnaud, chief economist with Alberta Central, which oversees the province’s credit unions. “It’s the state of the economy at the moment given the sharp drop in economic activity in Alberta, but in Canada in general, too, with all the measures to stop the spread of the virus.
“We are seeing everywhere a lot of layoffs in various industries.”
Some provincial leaders are beginning to talk about when some measures could be relaxed, allowing some more businesses to open. They are starting to also talk about what the economic recovery plan could look like.
St-Arnaud will be watching how many people won’t have a job to return to because their businesses can’t survive. Those people will remain stuck in the pool of unemployed Canadians until they find a new job.
Similarly, he says he’ll be focusing on whether people can stay afloat financially in a country that ranks among the highest in the world in household debt.
Those two situations will be more important, he said, than how high the unemployment rate peaks.
Based on various indicators of indebtedness, St-Arnaud said Alberta, British Columbia and Ontario are the most vulnerable to the economic shock of the pandemic, while P.E.I., Quebec and Saskatchewan are the least.
The situation in B.C. and Ontario, where housing costs have escalated significantly in recent years, is particularly worrisome because many households have no financial buffer.
“So, what happens when they lose their jobs? Could we get to a point where you have to sell your assets, i.e. your house, since this is a big part of their wealth?” St-Arnaud said.
‘Drastic and dramatic’
There have already been over three million employment insurance claims over the past month, and the Conference Board of Canada expects Canada to lose around 2.8 million jobs in March and April.
“The situation is drastic and dramatic. It’s nothing like what we’ve seen before, certainly in the modern survey data that we have. But it will be short-lived,” said Pedro Antunes, the Conference Board’s chief economist.
“The impact is self-imposed — we’re looking out for our health first. We’re shutting down the economy purposely.”
WATCH | Economist Pedro Antunes on sky-high jobless rates and how long they will last
Economist Pedro Antunes on sky-high jobless rates and how long they will last
The Conference Board of Canada chief economist says some sectors will take longer to recover after the pandemic than others.
Job growth will begin to pick up in May and accelerate over the second half of 2020, according to the Conference Board, assuming social distancing measures are gradually relaxed.
With health as the top priority, the economy remains in hiatus. That’s why the negative job market figures will only escalate.
While shocking at first glance, the real scare is how long they stick around.