Jobs picture turns negative and there's more bad news to come, economists warn

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The second wave of COVID-19 has been chipping away at Canada’s economic rebound for months, but it finally overpowered the labour market’s recovery in December, ending the country’s 2020 on a sour note that may linger for some time.

Statistics Canada said Friday that the economy shed approximately 63,000 jobs in December, a worse-than-expected loss and the first decline in overall employment since April. Canada’s unemployment rate rose as well last month, to 8.6 per cent, up from 8.5 per cent in November.

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“Canada’s labour market not only slammed on the brakes, it made a U-turn in December,” Canadian Imperial Bank of Commerce economist Royce Mendes wrote in a report. “The total number of jobs shed was worse than feared by the consensus and, given the early timing of the survey in December and the pandemic-related developments since then, there’s scope for another round of losses in the January report.”

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December’s job losses capped off a roller-coaster year for the Canadian economy and the world in general, as the coronavirus pandemic sickened millions and forced governments to shut down or restrict businesses, social gatherings and travel.

Canada’s unemployment rate has reflected that turmoil, starting the year near historic lows, at 5.5 per cent in January, before shooting up to 13.7 per cent in May and falling back down to a still-high 8.5 per cent by November. Around three million people had lost employment by April, StatsCan says, and the economy is still about 636,000 jobs short of where it was pre-pandemic.

COVID-19’s resurgence in the latter half of 2020 slowed the jobs recovery before ultimately reversing it. The 0.3 per cent dip in employment in December followed gains of 0.3 per cent in November, 0.5 per cent in October and an average increase of 2.7 per month from May to September.

A closer look at StatsCan’s job numbers shows some industries have been hit harder than others as well. For example, there were 332,300 fewer jobs in accommodation and food services in December than a year earlier. And although some industries have seen gains recently, such as manufacturing, employment in the services sectors as a whole was down by around 528,400 jobs compared to December 2019.

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Those figures may not show the whole picture. Because the statistics agency’s numbers reflect labour market conditions from the week of Dec. 6 to Dec. 12,  more recent public-health measures that have been put in place, such as the province-wide lockdown enacted by Ontario on Boxing Day, have yet to show up.

“The crisis has intensified since early December, especially in central Canada, and tighter restrictions could be coming,” said Brendon Bernard, economist at job-search website Indeed Canada. “Overall employer hiring appetite on Indeed held up fairly well through the end of the year, highlighting that many employers are looking ahead to brighter prospects later this year. Nonetheless, it’s clear once again that the job market can’t recover amid a raging pandemic.”

Even as vaccines are being rolled out, the downward trend in employment could continue this month, as governments try to curb further spread with further public-health measures. Quebec, as an example, is enacting a provincial curfew this weekend.

Capital Economics’ senior Canada economist, Stephen Brown, said they expect employment to fall by another 100,000 jobs in January. WestJet Airlines Ltd. also announced on Friday that about 1,000 workers will be furloughed, temporarily laid off, put on unpaid leave or have their hours reduced due to “volatile demand and instability in the face of continuing federal government travel advisories and restrictions.”

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A weaker labour market could factor into other economic statistics as well. The latest jobs report “offers the first concrete piece of evidence that the Canadian economy likely contracted in December,” said Nikita Perevalov, director of economic forecasting at Bank of Nova Scotia, in a report on Friday.

And COVID-19’s drag on the economy is poised to have longer-lasting effects.

The workforce participation rate dipped in December by 0.2 percentage points, to 64.9 per cent. The drop in labour force participation rates was “mostly comprised of male youth and working women, likely frustrated by the job search and staying home to take care of suddenly homebound children, respectively,” according to Leah Nord, the Canadian Chamber of Commerce’s senior director of workforce strategies and inclusive growth.

“The enduring impacts of the increasingly long-term unemployed and workforce drop-outs will cast a long shadow upon the recovery, as re-entry into what will assuredly be a very different labour market presents significant obstacles,” Nord added in a statement.

A recent report from Royal Bank of Canada’s economics unit found that, between February and October, 20,600 women “fell out” of the country’s workforce. Meanwhile, moves like Ontario’s recent extension of online learning for elementary school students will weigh on working parents.

“This trend of increasing employment that we saw through till November, we wouldn’t expect it to return anytime soon,” Nord said in an interview.

• Email: gzochodne@postmedia.com | Twitter: GeoffZochodne