Data Series | part one
As modellers and analysts our claim to fame is in trying to bring together a wide range of inputs to make an educated prediction about what the world may look like in the next 5, 10, or even 50 years. Our models are built around some logic and are used to see how a system may react to a set of shocks or changes. Of course, there are limitations. COVID-19 is the type of unexpected shock to the global system that deems even the best of analytical models as simple guesses. The reason is simple: the range of possibilities is too wide (and frankly worrying) – and many of us are already working with the certainty that the world post COVID-19 will be very different from the one before it.
So, instead of predicting the world, we are launching our COVID-19 data series. The goal is to share with you a set of data on important considerations and how they are being impacted by the COVID-19 pandemic, and the lockdown it has caused on the global economy. The topics will range from employment, to migration, to infrastructure, and in all cases, we will be happy to hear your thoughts and perspectives on our discussions.
Data Series: COVID-19 and our Jobs
Our first data series will be on how COVID-19 has affected Canada’s working population. Canada’s Government has already taken a set of wide-ranging effects to try and minimize the impact of COVID-19 on the country’s economy, and particularly small businesses. Just last week, the Prime Minister announced an unprecedented 75% wage subsidy for small businesses that are directly impacted by the pandemic. However, many small business surveys are still showing Owners very worried about their ability to survive the next few months. What the Prime Minister is trying to control is the unemployment rate in Canada. By keeping people employed, however low the demand for some of these businesses, the hope is that the economy will be able to recover much more quickly and fluidly in the post COVID-19 world.
So, what is the unemployment rate in Canada, and how has COVID-19 affected that? Figure 1 below shows the unemployment rate in Canada on a monthly basis going back to 1976. One clear pattern from the chart is that Canada has seen several economic disruptions that have led to sudden and large increases in unemployment in Canada, only to see a longer-term recovery. One of the most recent of those economic disruptions was the recession of 2008, which as many experts will tell you had a much lower effect in Canada as some of our peers on the global stage. In the 2008 scenario, our unemployment rate jumped from approximately 6% in June of 2008 to about 8.5% In June of 2010.
What is most worrying about the impacts of COVID-19 is the unprecedented and economy-wide disruption that it caused. What do we mean by that? Well, if we analyze Canada’s current labour force, we will see that, currently, Canada’s labour force stands at approximately 20 million strong. These are Canadians that can participate in the workforce (i.e., of working age and are able to work). The unemployed of those 20 million, (1.13 in February 2020) are the unemployment rate. When we look at the last year of unemployment in Canada, we see some seasonal variation, but overall a not-so-variable unemployed population.
One of the first and only announcements made in Canada related to the change of the unemployment rate comes from the week of March 16th to March 22nd, within which the total number of jobless claims was a staggering 929,000 (BNN Bloomberg). So how does that compare against the numbers prior to the COVID-19 related shutdowns? If we assume that the 929,000 jobless claims are not included in the 1,134,000 that were already recorded in the February numbers, it would lead to a new total of 2,063,000 unemployed persons in Canada’s Labour Force, which will lead to a new unemployment rate of over 10%. What is most worrying about this is the sheer timeline. Whereas in 2008 it took over 2 years for the unemployment rate to increase by 1.5%, we just saw an increase of 4.5% practically overnight?
On Thursday, the Government of Canada is releasing new jobless numbers that will also include the week of March 23rd. Will we see yet another number close to 1 million new jobless claims? Will the unemployment rate spike past the 12% unemployment observed in 1982?
Most importantly, the question everyone is asking, how many of these are simply temporary (and for how long), and how many will more permanently stain Canada’s economy.
More coming soon.