Coronavirus: How long will pandemic-related job losses last in Canada?

Click to play video: 'Nearly 2 million Canadians lost their jobs in April'
Nearly 2 million Canadians lost their jobs in April
WATCH ABOVE: Nearly 2 million Canadians lost their jobs in April – May 8, 2020

New figures are painting a grim picture of the coronavirus pandemic’s impact on Canadians: the economy shed nearly two million jobs in April, driving the total number of job losses since the start of the COVID-19 shutdown to over three million and the unemployment rate to 13 per cent.

“These numbers are historic,” university economics professor Miles Corak said of the Statistics Canada April labour force figures released Friday.

“We have gone, in just a couple of months, from a high-pressure, high-demand, high work economy with very low unemployment rates to the highest unemployment rates in more than two or three decades.”

With many provinces already taking the first steps to gradually loosen public health restrictions and re-open their economies, how much longer are these historic unemployment numbers expected to persist?

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That depends on a mix of economic, consumer, public health and public policy factors, economists say.

According to Statistics Canada, temporary layoffs accounted for 97 per cent of new unemployment recorded in April — a fact Corak described as a “silver lining” because that means those people have maintained some attachment to their employer or expect to return to work.

“The big question mark is whether it holds up,” said Corak, who teaches in New York and Ottawa.

“Past experience shows us that people who believed that they were going to be recalled but ultimately aren’t, they tend to have very long spells of unemployment.

“So if we don’t rebound quickly, there’s a chance that this is going to drag on much longer than we currently anticipate and much longer than in previous recessions.”

Click to play video: 'Coronavirus outbreak: Trudeau says bleak job numbers in Canada ‘tell us what we already knew’'
Coronavirus outbreak: Trudeau says bleak job numbers in Canada ‘tell us what we already knew’

Ultimately, whether temporary layoffs in Canada stay temporary or become permanent hinges in a big way on how long the government-ordered shutdown of certain industries and sectors lasts and how “safely” businesses can re-open, economists said.

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“Ultimately that’s driven by the passage of the virus,” said Douglas Porter, chief economist and managing director of economic research at BMO Financial Group.

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“The longer [the closures] last, the more businesses are going to ultimately fail.”

The sectors likely to feel the pain the longest and bounce back last are those that were first hit in March as the coronavirus spread — mostly “public-facing jobs” in the food services, hospitality and tourism industries, said Tammy Schirle, a professor of economics at Wilfrid Laurier University.

“Even when they reopen, it’s going to be very low demand to start as people are hesitant to start interacting with everyone else,” Schirle said.

Jobs related to sports, entertainment and travel especially “could still be heavily impacted a year out,” Porter added.

Some businesses operate on small profit margins and partially reopening isn’t viable for them, so they might remained closed “until they see consumer demand rebound,” Schirle said.

Having consumers “confident enough to start spending again” will also be “key” to the speed of Canada’s economic and labour market recovery, Corak emphasized.

“Opening up businesses isn’t going to help if people aren’t going to fill the seats and walk down the shopping aisles,” he said.

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“What’s really important here is that consumers start feeling confident and that they have the money and income and confidence to spend it.”

While all these factors depend on containment of the virus, Porter said he thinks public policy does “play a pretty big role” in the path ahead as well.

Click to play video: 'Coronavirus outbreak: Trudeau extends emergency wage subsidy, says government will remain flexible to needs of Canadians'
Coronavirus outbreak: Trudeau extends emergency wage subsidy, says government will remain flexible to needs of Canadians

After Statistics Canada’s figures came out Friday, Prime Minister Justin Trudeau announced that the federal government is extending its emergency wage subsidy program for hard-hit businesses — a development Porter referenced during his interview.

“I think that’s an effort to get people back on the payrolls, to encourage companies to take that up,” Porter said.

While they haven’t been “perfect,” Porter said the government’s emergency measures amid the pandemic have been “relatively well done so far.”

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“Hopefully that continues in the months ahead,” he said.

Has April’s labour force survey marked the worst?

Asked whether pandemic-related job losses peaked in April, Porter said it’s possible the unemployment rate could still “tick a bit higher” this month.

Porter noted the most recent labour force survey was conducted mid-April and the next one will be conducted mid-May and therefore may not capture some of the people who might return to work later this month as provinces starting reopening on different dates.

“We’re not going to see anything close to a two-million job loss in May — hopefully not even in the same galaxy,” he said.

“But we do think there’s the possibility that we might see a little bit of a further decline in May.”

Click to play video: 'Alberta’s unemployment rate in April spiked to 13.4%'
Alberta’s unemployment rate in April spiked to 13.4%

The month of April “should represent a low point” for the country’s workforce, Schirle said, but reiterated much depends on “everyone behaving well and keeping the pandemic contained.”

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Corak agreed, saying a rushed reopening and a rebound of the virus would result in “a double whammy that’s going to be much worse in the long run.”

Provided that provinces’ reopenings proceed unhindered, Porter said his team believes many jobs will “come back relatively quickly” but that they still assume the pandemic will leave “some lasting damage.”

“Even we as relative optimists believe the unemployment rate will still be a couple percentage points higher even a year out than it was before this all began,” he said.

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