April employment report confirms job carnage continues

May 11

We were anticipating massive job losses in April. And the recently released Statistics Canada Labour Force Survey (LFS) revealed the carnage was even greater than expected.

As a quick reminder, the first indication of the impact from the widespread closure of non-essential businesses and the contemporaneous onset of a global recession came in the March LFS, when employment in B.C. fell by 132,000. We were looking for a somewhat larger loss to follow in April. But it turns out March’s huge job loss doubled in April, with employment dropping by a staggering 264,000.

So in the span of two months total employment in the province has plunged 15.6 per cent. This is a very large decline. The true magnitude of this is difficult to comprehend. In many parts of our lives, a 15 per cent change is not especially large (e.g. price reductions of 15 per cent are common, a drop in revenue for a company in this range is also common). But a 15 per cent fall in jobs over just two months, in a world where respectable job growth for an entire year is 2.5 per cent, is a massive hit.

Some important take-aways for the overall B.C. employment picture are as follows:

In April, employment plummeted by 264,000 (double the previous month’s decline).
Nearly 400,000 jobs have been lost in two months. This means 14 years of job growth has been erased – the last time employment was at its current level was back in 2006.
The provincial unemployment rate jumped to 11.5 per cent, from 7.2 per cent in March and just 5 per cent back in February.
The recent job losses are truly unprecedented. Looking at other recessions or downturns provides some context. No other downturn or stretch of job losses comes even to what is going on currently. As shown in Figure 2, during the 2008-09 recession and global financial crisis B.C. shed 72,000 jobs over a nine-month period, a fraction of the nearly 400,000 noted above.
In the 1981-82 recession, employment fell 109,000 over a 17 month period. In percentage terms this was a sizable 8.2 per cent decline. But since February 2020 the number of jobs in B.C. has slumped by almost 16 per cent.

Figure 1

Figure 2

Job losses a private sector story

Most of the lost jobs are in the private sector. Public sector employment has also fallen by what would normally be a very significant amount. But in the context of the current labour market chaos, public sector job losses are minimal.

In April, private sector employment collapsed by 254,000 (close to the total decline because nearly all job losses were in the private sector).
In contrast, public sector employment decreased by 12,800 in April. This is a 2.8 per cent decline, versus April’s one-month free-fall of 17 per cent for private sector positions.
Combining March and April’s record job destruction equates to 388,000 private sector jobs lost, marking an eye-popping 23.9 per cent decline since February. In a span of two months, nearly one quarter of private sector jobs in B.C. disappeared.
Measuring private sector job losses in years, the last time the number of employees in the private sector was at its current level was early 2003 – meaning we have suddenly erased 17 years of private sector job growth.

Figure 3

Younger people hardest hit

Young people continued to lose jobs at an alarming rate in April. But that month also saw a substantial decline in employment among the 25-54 age cohort.

Job losses accelerated for the core working age group (25-54 years). For this cohort, job losses tripled between March and April.
The number of lost jobs for younger people (15 to 24) also rose in April, to 73,000.
Because this age cohort is smaller, the impact in proportional terms is huge. Employment for younger workers dropped by a staggering 25 per cent in April.

Figure 4

The magnitude of the job losses for young people becomes evident when contemplated in terms of “years of job growth”. With April’s decline, employment for the 15-24 age cohort dropped to the lowest level since consistent data have been maintained.
Employment for the core working age group has also suffered a once-unimaginable setback, with the number of jobs sinking back to 2003 levels.

Figure 5

Figure 6

A glimpse of what lies ahead

We will see employment start to rise again in the months ahead. As consumer services are gradually eased and more businesses re-open, there will be some “bounce” in the job numbers, notably in retail and personal services (barbers and hair salons etc.) and also in hospitality and food-services. Even a measured re-opening of restaurants operating at half capacity requires additional staff. The federal wage subsidy program, which was recently extended to the end of summer, along with various other government support programs, will also help sustain companies and thus jobs. At the same time, we expect the economic re-opening process to be gradual and bumpy. It will take time for businesses to resume operations, and consumer confidence will take longer to return. Plus, sectors related to international air travel, servicing foreign visitors, and large public gatherings can expect to see little job recovery this year.

Current uncertainly makes forecasting unusually difficult. But when thinking about the coming employment recovery, it is worth considering this point. Recall that during the 2008-09 recession employment in B.C. decreased by 72,000. It was not until early 2012, nearly four years later, that employment returned to its pre-recession level. For a similar four-year job recovery to have a chance of materializing this time around, we would need to see around 330,000 jobs return by the end of the year. That’s unlikely. Today, we are starting from a much, much deeper hole.

Ken Peacock