Strong, but for how long?

Last week's US non-farm payrolls report, which showed that the economy added almost a million jobs in March, was widely viewed as firm evidence that full recovery from the pandemic is now under way. Can we say the same about the equivalent Canadian data, published by Statistics Canada this morning?  Measured by the relative sizes of the two economies, the Canadian headline data -- a gain of 303,000 jobs in March -- was even stronger than the US figure. However, recent developments in the pandemic suggest that this may be the best number we see for some time. 

Just about everything in the Canadian data looks positive. Aside from the headline increase, we can note that: the unemployment rate fell to 7.5 percent, its lowest level since the last pre-pandemic month (February 2020); both full and part time employment posted significant gains; employment rose in seven out of the ten Provinces; labour underutilization fell to its lowest level since February 2020; private sector employment accounted for over 200,000 of the jobs added in the month; and total employment is now back to just 1.5 percent below its pre-COVID level.

All good, but it looks very much as if the positive outcome for the month was heavily influenced by the timing of StatsCan's monthly survey. There was a sort of "sweet spot" in the middle of the month when several Provinces, including the most populous, Ontario, had lifted many of their COVID restrictions -- and the timing of the survey coincided exactly with that sweet spot. The impact of that can be seen in the sectoral composition of the data, which showed strong employment gains in precisely those parts of the economy that have been most affected by lockdowns and such: retail trade (up 95,000 in the month), culture and recreation (up 62,000) and accommodation and food services (up 21,000).

Sad to relate, the removal of restrictions across the country proved very short term as the third wave of the pandemic picked up steam. Ontario hastily reimposed a lockdown at the start of April and quickly segued into a stay-at-home order just a few days later. There are ominous trends also in BC (with the so-called Brazilian variant becoming a major threat), Alberta and Quebec.  The hasty return to much tighter restrictions is certain to have a significant impact on the April employment data, for which data collection starts in just a few days. The latest restrictions may or may not last long -- Ontario's are set to run initially for just four weeks -- but they will create the opposite of a sweet spot for the jobs market for at least one month, if not longer.