How bad will it get?

Employment in Canada fell by 63,000 jobs in December, the first decline since April, according to data released by Statistics Canada this morning.  The unemployment rate edged up to 8.6 percent. Total employment remains 636,000 below its pre-pandemic (February 2020) level and a further 488,000 people are still working less than half their normal hours.

The decline in employment was widely forecast, given the rapid re-imposition of lockdowns across the country in December as the COVID second wave gathered pace. We may note in passing that the analysts' consensus, always particularly inaccurate in gauging this highly volatile data series, was looking for the loss of only 39,000 jobs.  However, some details of the report were a little more encouraging than the headline. 

The services sector was inevitably the worst-hit, losing 74,000 jobs in the month as restaurants once again faced tough restrictions.  The part-time nature of much employment in this sector was reflected in the fact that part-time jobs more than accounted for the overall loss in employment, with 99,000 such positions lost in the month. Manufacturing, by contrast, added 15,000 jobs in the month, contributing to an overall gain of 36,500 full time jobs across the country. 

An indication of what may lie ahead can be found in the Ivey Purchasing Managers Index, released earlier this week. The index fell sharply to 46.7 in December from 52.7 in November; any reading below 50 indicates slowing activity. Although the latest reading is far stronger than those seen at the peak of the first wave of COVID, the fact that the index has been moving steadily lower since August is ominous.

With COVID restrictions tightening still further in January -- in Quebec, for example, an overnight curfew begins this weekend -- prospects for the economy and hence for employment look bleak for the first quarter of the year. And beyond that?  Canada's vaccine rollout is proceeding very slowly, with the Provinces blaming the Federal Government for not providing enough vaccines and the Feds blaming the Provinces for not doing a good enough job on distribution. (Spoiler alert: it looks very much as if the Provinces are in the right here). Without a level of immunity that will allow a return to more normal business activity, it is likely that the Canadian employment market will remain weak until the summer.