Canada’s job market suffered a major setback in January as the second wave of COVID-19 dealt uneven blows to the economy.

By Matt Lundy* - February, 2021 

 
The country lost a net 212,800 positions last month and the unemployment rate jumped to 9.4 per cent from December’s 8.8 per cent, Statistics Canada said Friday. The results were considerably worse than expected. Ahead of Friday’s release, the median estimate from private-sector economists called for a loss of 40,000 positions.
 
Combined with December’s drop of 52,700 positions, the second wave of COVID-19 has brought employment back to levels seen in late summer. Nearly a year into the pandemic, the number of employed Canadians is down by roughly 860,000 from February, 2020.
 
The January results were further evidence of a K-shaped recovery. Part-timers in the retail and food industries were deeply affected as Ontario and Quebec ratcheted up their restrictions. Elsewhere, several industries and regions were able to tread water or continue hiring.
 
 
The path forward is uncertain. Virus transmission is trending lower across the country, leading some provinces to start easing restrictions. Still, Canada’s vaccination push is off to a sluggish start and contagious variants of the virus are increasingly being detected.
 
“I don’t think there’s any magical policy bullet that can overcome this, other than to try and contain the virus as much as possible,” said Mikal Skuterud, a professor of labour economics at the University of Waterloo. “I’m not really surprised by any of [the job numbers]. It’s just really depressing.”
 
Friday’s results were heavily influenced by Ontario and Quebec, which combined for a loss of 251,400 positions last month. In late December, both provinces enacted new restrictions to control the spread of COVID-19, notably on non-essential retail operations.
 
Those efforts were clearly reflected in the January numbers. Nationwide, part-time employment fell by a net 225,400 roles, with Ontario down 152,700 and Quebec by 92,500. Those provinces accounted for nearly all of the 167,600 positions lost in retail. The country lost a further 75,000 jobs in accommodation and food services.
 
The unemployed are relying on a suite of federal support programs to backstop their finances, with pretax weekly payments for each program totalling at least $500. To date, nearly 1.7 million have received support through the Canada Recovery Benefit, for example.
 
“Household incomes look like they’re holding up,” said Nathan Janzen, senior economist at Royal Bank of Canada. “We know that purchasing power for households will be there, once containment measures do eventually ease.”
 
The second wave is having a large impact on racialized Canadians. The unemployment rate among Southeast Asians aged 15 to 69 jumped to 20.1 per cent from December’s 12.5 per cent (unadjusted for seasonality). It also rose sharply for Black Canadians (16.4 per cent, from 10.9 per cent) and Latin Americans (16.6 per cent, from 12.1 per cent).
 
Once again, young people are deeply affected. Employment for those 15 to 24 dropped by 107,500 last month. Statscan said that female youth employment was down 17.4 per cent from last February, the steepest drop for a major demographic group. Young women accounted for a slight majority of those who dropped out of the labour force in January.
 
And with many kids shifting to virtual classrooms after the holidays, there were clear impacts on parents. In particular, mothers of children aged 6 to 12 saw outsized disruptions to their employment and work hours, Statscan noted.
 
Working moms “were particularly hard hit,” said Behnoush Amery, senior economist at the Labour Market Information Council. “They’re going to have a persistent impact on their earnings potential.”
 
Despite the overall setback in January, there were points of strength. Employment rose in seven provinces, paced by a gain of 20,800 in Alberta. The construction industry notched a healthy addition of 38,700 jobs, with health care and social assistance up 18,500. And full-time jobs managed to eke out a gain of 12,600. With the damage largely confined to part-timers, the total numbers of hours worked across the economy rose 0.9 per cent.
 
Mr. Janzen of RBC suspects that employment will start to grow again in February, although second-wave layoffs won’t be erased in short order.
 
To recover jobs in highly affected industries, “the key there is that the businesses tied to those jobs have to survive,” Mr. Janzen said. “If there’s a question [for the future], that’s where it is.”
 

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About the Author

*Matt Lundy is an economics reporter for The Globe and Mail's Report on Business section.

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