Still today, the whole Canada is busy to forecast for the upcoming trends of the Recession and Economy behavior – It’s basically depends on how long these COVID-19 measures are in place? And according to my last episode, I started discussing few potential lingering effects of COVID – 19 will be on the Canadian Economy. And I have already discussed about the following major issue:
Debt / Loan backlog
While the decision of emergency interest rate cuts by Bank of Canada, income support and mortgage deferment plans should help heavily indebted Canadians from hitting rock bottom, it is inevitable that many will go further into the debt hole. There are reports that credit card companies are already worried as consumers are using plastic to replace lost income. All that raises questions about whether, once the illness is past, consumers can resume their role as debt-fueled machines of the North American economy. Meanwhile, governments are accumulating massive new debts of their own. Highly leveraged businesses also face stress.
Although CERB and other Financial Tools are pumping the money in the economy, basically those are to fill the gap for the lost income due to Job/Business Loss during COVID – 19 situation. But people are now scared to spend all the pumped money and hold it to raise the debt (not paying current debts which are due) level to nowhere. The impact of that period-end gloom, Canadians have increasingly turned from putting money away in bank accounts and other investments, to instead using it to pay down debt. Let’s discuss one by one the other lingering factors as well:
Business Existence and Recovery
From where we stand today, the COVID-19 crisis will not likely end until a vaccine is widely available or broad immunity has been achieved in some manner. In the meantime, social distancing and other measures will remain in place, to varying degrees.
There is also commentary of moving to an “80% economy” or “80% Business Existence” as social distancing measures remain in place: many office workers would continue working at home, work sites would operate at less than normal capacity, domestic and international travel would be limited and subject to restrictions, more retailers and restaurants would re-open under strict guidelines, large gatherings would remain prohibited, and schools would re-open with social distancing measures implemented.
Overall, recessions hurt people, but some economic theory says that capitalism actually needs periodic downturns to refresh itself through creative destruction. 20% Weak “automaton” businesses and sunset industries are finally killed off, clearing the way for healthier, younger or more efficient firms, making the whole economy stronger in the aftermath. But the adjustment process is far from instant and can be painful for displaced/laid off workers.
To be sure, Canada will face significant headwinds in the post-COVID-19 world – from the pressing need to improve productivity across the economy, from a resumption of global trade which is likely to be less free and open and may recover and grow at a slower pace than before, and not least, from challenges in the relationships with the United States and China, our two largest trading partners.
The Canadian economy lost almost two million jobs in April, a record high, as the closure of non-essential services to slow the spread of COVID-19 forced businesses to shutter temporarily. The loss of 1,993,800 comes on top of more than one million jobs lost in March, and millions more having their hours and incomes slashed.
The unemployment rate soared to 13.0% in April which is the largest drop on record – and the unemployment rate which jumped to 7.8% in March from 5.6% in February. Although these early indicators show how various labor market segments are being impacted, there is still much we don’t yet know. Moreover, Job losses were spread across many sectors with the biggest total falls occurring in Wholesale and retail trade (41%, 44–45%), Accommodation and food services (72%) and Educational services (61%). Almost 300,000 jobs were lost in the Wholesale and retail trade, accounting for nearly one third of all job losses. Regionally, the most severe contractions in total employment level occurred in British Columbia, Quebec and Ontario, which were among the first provinces to implement social distancing and other measures designed to prevent the spread of COVID-19. On a year-to-year basis, British Columbia, Newfoundland and Labrador and Alberta experienced the steepest employment declines in relative terms.
As more data are collected and compiled over the coming weeks and months, a more complete picture of the depth of this unprecedented economic retrenchment will emerge. With that in mind, here are some of the major trends observed and according to the following report by The Canadian Press was first published May 8, 2020:
Here’s a quick look at April 2020 employment information summary:
• Unemployment rate: 13.0 % (7.8% in March)
• Employment rate: 52.1 % (58.5% in March)
• Participation rate: 59.8 % (63.5% in March)
• Number unemployed: 2,418,300 (1,547,000 in March)
• Number working: 16,184,900 (18,178,700 in March)
• Youth (15-24 years) unemployment rate: 27.2 % (16.8% in March)
• Men (25 plus) unemployment rate: 10.8 % (5.9% in March)
• Women (25 plus) unemployment rate: 11.3 % (7.1% in March)
Here are the jobless rates last month by province at a glance:
• Newfoundland and Labrador 16.0 % (11.7% in March)
• Prince Edward Island 10.8 % (8.6% in March)
• Nova Scotia 12.0 % (9.0% in March)
• New Brunswick 13.2 % (8.8% in March)
• Quebec 17.0 % (8.1% in March)
• Ontario 11.3 % (7.6% in March)
• Manitoba 11.4 % (6.4% in March)
• Saskatchewan 11.3 % (7.3% in March)
• Alberta 13.4 % (8.7% in March)
• British Columbia 11.5 % (7.2% in March)
(to be continued – Next Episode: Immigration & Housing )..
First Episode: The economy during COVID-19 in Canada
Second Episode: Economy during COVID-19 in Canada