Canadian Employment (May 2020)

Brian DePratto, Senior Economist | 416-944-5069

Date Published: June 5, 2020

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Light Starts To Form In May Jobs Data

  • Canadian employment shocked expectations, with a net 290k jobs added in May (markets were expecting a further 500k drop). This represents about 10% of the jobs lost over March and April. The labour force recovered about 30% of its prior losses (+491k) as people began to look for work. This drove a further rise in the unemployment rate, up 0.7 points from April at 13.7% - a new high.
  • Once again, it was hours worked that were truly telling. Just as hours outpaced employment on the way down, they outpaced the employment gains in May, up 6.3% (employment was up 1.8%). 
  • The pandemic continues to create classification issues – if a person lost their job but didn't look for another (a common outcome given the current backdrop), they are not included in the labour force, making the headline unemployment rate look lower than it otherwise would. Similarly, a person can be employed but working less than they usually would. Statistics Canada reported that taking these factors together, roughly one third of the potential labour force was 'underutilized' in May. This is an improvement from April, but remains more than three times above its February share.
  • The recovery in May was led entirely by private sector employment (+329.7k), as both public sector employment and the ranks of the self-employed fell. The service sector may have led the way down, but the May gains were skewed slightly towards the goods-producing sector (+164.7k), driven by construction and manufacturing. In the service producing sectors – up 124.9k as a whole – the gains were largely driven by wholesale and retail trade (+107k). The bulk of the gains were in full-time work (+219k).
  • The regional distribution of the gains was broadly aligned with easing of pandemic response measures at the time of the survey (May 10 to 16). The bulk of the gains were seen in Quebec (+230.9k), helping lower the provincial unemployment rate 3.3 points, to match the national average of 13.7%. Almost all provinces reported employment gains, with the exception of Ontario, where employment fell a futher 64.5k net positions.
  • The impact on lower-wage workers remains a significant challenge. Although employment among those earning less than two-thirds of the median wage recovered in line with the broader trend, these workers remain more likely to be working less than half of their regular hours. The May rebound was also skewed towards men (+206k, or roughly 70% of the total). Younger Canadians (15 to 24) bore a disproportionate share of the March and April declines (roughly 30%), but made up only about 10% of the gains in May.

Key Implications

  • This is the kind of surprise we like. We may have only regained a small slice of March and April's unprecedented job losses, but the story could have been much worse. Some sectors clearly have a long road ahead of them, but the May employment data helps make the case that as re-openings continue, employers and employees are ready to get back to it. 
  • There is reason to think that the improvement can continue. Most directly, because today's data captured the employment picture as of May 10 to 16, it does not capture the recent re-opening measures in Ontario. The impact of the pandemic has been brutal, to say the least, but the worst may now be behind us.
  • Before we get carried away, it bears noting that continued gains in employment will rely on demand for goods and services, meaning income. Close to 90% of those that lost work over March and April are still sitting on the sidelines. Under its current design, the earliest Canada Emergency Response Benefit recipients will receive their last payment in mid-July, meaning that unless they are able to find work, many current recipients will see a significant drop in income as the summer goes on, particularly the self-employed.  It is clear that the shape of any economic recovery will be determined in large part by the path of employment. 

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