Thursday, November 24 2022

Shaken by the rapid spread of Omicron, the Canadian economy lost 200,100 jobs in January amid tougher public health rules put in place to slow the COVID-19 variant, but most signs point to a rapid recovery .

The drop marked the biggest decline in a year — the economy lost 207,800 jobs in January 2021 — and the first slowdown in a series of job gains since May, Statistics Canada said Friday.

Job losses also pushed the unemployment rate to 6.5% last month, from 6.0% in December, rising for the first time since April due ‘entirely’ to people being temporarily laid off or due to start a job soon – the number of Canadians looking for work has barely budged, the agency added.

As Omicron spread across the country, governments reimposed capacity limits and workplace closures such as restaurants, retail outlets, gyms and theaters. The vast majority of job cuts have taken place in Ontario and Quebec, where some of the toughest measures of any province have been taken.

Food services and hotels were among the hardest hit, posting their biggest monthly decline since the first wave. The fall, which accounted for 57% of the total decline, hit young people and women the most, Statistics Canada said.

Culture and recreation – performing arts, cinemas and sports halls – accounted for nearly another quarter of the decline, with some 48,000 job losses erasing gains made since August, almost entirely in Ontario. Retail employment also fell significantly.

“It obviously has Omicron written on it,” said Desjardins chief economist Jimmy Jean.

A record share of employees also took time off work due to illness in January, with one in 10 absent from work. The number of employees who worked less than half their usual hours rose by 620,000 or two-thirds, the biggest increase since March 2020.

“That’s going to be reflected in the January GDP numbers,” Jean added.

But absence statistics can be cause for optimism, economists said.

“Even though the rise in unemployment was stronger than consensus forecasts, there was also evidence that companies tried to keep staff on the payroll during the Omicron wave due to expectations that lockdown measures would be short-lived, and also due to the difficulties in recruiting staff in the previous phases of reopening, ”said Andrew Grantham, senior economist at CIBC.

Most industries saw job numbers rise last month, with construction and natural resources fueling an additional 23,000 jobs in the goods-producing sector alone.

Royce Mendes, managing director of economics at Desjardins, said that with Omicron cases likely past their peak and the most stringent pandemic measures lifted, “this is the start of a recipe for another rapid rebound from the COVID wave” despite the “carnage” in January.

These ingredients also mean that central bankers are “still on track” to raise rates in March as they seek to head off further inflation, he added.

The Bank of Canada kept its key interest rate unchanged last month at 0.25%, but signaled that it was preparing to start raising its key rate in a bid to control inflation and return to its 2% target.

The annual inflation rate rose to 4.8% in December, its highest pace since September 1991, and Bank of Canada Governor Tiff Macklem said the rate could remain “uncomfortably high” around 5% in the first half of 2022.

The central bank’s next interest rate decision is set for March 2.

Recent history can be a guide to employment numbers in the months ahead.

The wave of job losses when COVID-19 cases spiked in January 2021 was followed by a bigger rebound of 272,500 in February last year. The economy lost 198,800 jobs last April – followed by a slight decline in May – but rebounded with 214,600 gains in June.

“The Canadian labor market has shown an impressive ability to rebound from previous waves last year, and some of the conditions that contributed to the recovery, such as employers’ high appetite for hiring, remain,” said Brendon Bernard, senior economist at job posting site Indeed. in an email.

Total hours worked in the economy fell back below its pre-pandemic level last month, plunging 2.2% – the biggest drop since April.

The average hourly wage rose 2.4% year over year, Mendes noted, despite labor shortages in industries ranging from information technology to trucking.

More than 40% of employees worked primarily from home in January, which is higher than one in four who have done so in recent months, Statistics Canada said.

The total number of unemployed jumped by 106,000, or 8.6% month-on-month, to 1.34 million in January.

This report from The Canadian Press was first published on February 4, 2022.

Christopher Reynolds, The Canadian Press


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