A truly alarming outlook for the B.C. job market as employment plummets in March
At the Business Council we regularly monitor the provincial job market, commenting on overall labour market conditions, employment growth and the near-term outlook in different industries. Looking ahead, we expect to be providing an exceptionally gloomy narrative over the course of the second quarter of 2020 – if not longer.
Today (April 9th), we gained some insight into the magnitude of job losses resulting from the extraordinary measures being adopted to contain the spread of the coronavirus as well as from the contemporaneous global recession which is now hammering most of B.C.’s export industries. According to Statistics Canada’s Labour Force Survey, the B.C. economy shed an eye-popping 132,000 jobs in March. This means more than three years of typical job growth evaporated in a single month. The biggest monthly employment decline in B.C. during the 2009 Great Recession was 10,000. Total cumulative job losses during that recession amounted to “just” 58,000.
Figure 1
Although the March reading provides some insight into what lies ahead, it won’t be until June/July that a clearer picture emerges regarding the full magnitude of job losses. Worryingly, large job declines are still ahead. We say this because the Labour Force Survey was conducted over the week of March 15th to 21st. In B.C. a state of emergency was declared on March 18. And on March 20thDr. Bonnie Henry announced the closure of restaurants, bars and other consumer-facing services. Considering most business closures occurred just after or as the March Labour Force Survey was concluding, further large employment declines are coming. On May 8th Statistics Canada will release its April 2020 Labour Force Survey (LFS). This will be the first month showing the effects of the lockdown of large slices of the economy. The broader effects of the global downturn will also be more evident. The carnage is sure to intensify as the spring season unfolds.
By early May we will have March’s employment report (that only partly reflects job losses) as well as April’s LFS results. As practitioners, we always caution against putting too much emphasis on the results of a single month or two of data. This will be especially true as the Survey “struggles” to fully reflect what amounts to an unprecedented labour market shock. In a statistical sense, it will take several months of data to develop stronger inferences about the state and evolution of the job market in 2020. At that point, we will be further into the economic downturn that started in March. In early summer we will also have a couple of months of employment data from a separate survey that Statistics Canada also administers.[1] As well, March and April’s Employment Insurance figures will shed additional light on the extent and sectoral allocation of job losses.
The March employment report is consistent with recently released BCBC projections suggesting the province’s economy (real GDP) will contract by around 7% in 2020, with some chance of a deeper 10-12% decline. A drop in employment of 180,000 in 2020 is broadly consistent with a 7.3% decline in GDP (it represents a 7% decrease from B.C.’s average 2019 employment level). If provincial output (GDP) falls by 10-12%, 300,000-400,000 jobs could be lost – erasing 8-12 years of job growth.
These are rough estimates. And in reality, because the business closures and curtailments mandated by the provincial government are disproportionately affecting relatively labour-intensive services industries like restaurants and bars, the associated decline in GDP may be accompanied by an even bigger negative impact on employment. This is something we will be closely tracking in the weeks ahead.
In trying to make sense of labour market conditions, the unemployment rate is the indicator that’s most familiar to many readers. If the labour force remains roughly the same size as in 2019, under the “more optimistic” scenario (where employment falls by 180,000-200,000) the unemployment rate would average around 11% in 2020. Under the deeper downturn scenario, the jobless rate rises to 15-17%. During the Great Recession, the unemployment rate in B.C. averaged 7.7% in 2009.
Figure 2
The expanded federal wage subsidy program, where the government will pay 75% of a worker’s wage (up to a maximum of $58,700), will help some distressed companies retain employees. But it will not change the reality that tens of thousands of B.C. businesses are facing plummeting revenues and operational shutdowns, signalling widespread layoffs no matter what governments do. The fact that one-quarter of all jobs in B.C. are in the particularly hard-hit food and accommodation, retail, and information and recreation sectors is reason enough to brace for further dramatic job losses.
Figure 3
In sum, we are looking at short-term job destruction on a scale never before recorded, or even contemplated. True, many of these jobs could return if the lockdown of much of the private sector economy ends in a few weeks’ time. But the longer the restrictions stay in place, the larger will be the number of B.C. businesses that disappear due to insolvency or permanent closure. In that scenario, significant numbers of workers on “temporary” layoff will discover they don’t have jobs to come back to. And thanks to the present regime of business shutdowns and aggressive social distancing measures, we are almost certainly headed for a rate of business mortality in 2020 that will far exceed anything B.C. has ever experienced before.