Posted: 08 May 2020 5 min. read

Canada loses 2 million jobs with more than 1/3 of Canadians experiencing labour disruption, America loses more than 20 million jobs in April

Canadian labour force survey for April

Before delving into the details, let’s first summarize the main takeaways from today’s dreadful employment report. First, everyone knew that employment collapsed in April. The only question was its severity. Second, the headline figures were less dismal than Bay Street anticipated, but market reaction was notably muted. Importantly, Statistics Canada went above and beyond, providing additional information so as to help Canadians understand the socio-economic impact of the pandemic. Overall, the labour market impact is broadly in line with what we had anticipated.

The Canadian economy lost nearly two million jobs in April, or about half the losses expected by analysts. Taken together with the jobs lost in March brings the total decline in employment since the beginning of the COVID-19 economic shutdown to over three million. Full-time employment fell by 9.7 percent, while part-time employment fell by 17.1 percent.

The unemployment rate rose 5.2 percentage points in April to 13.0 percent. This is the second-highest level in history, only 0.1 percentage point below the record set in December 1982. However, the headline figure does not fully reflect the extent of layoffs. To count as unemployed, you have to report on the survey that you do not have a job but have actively looked for work. Since many of the people who were laid-off due to COVID-19 didn’t look for work, assuming they will return to their job once it is safe, they were not counted as unemployed. Including these individuals would lift the jobless rate nearly five percentage points to 17.8 percent.

The goods-producing sector was hit harder in April, losing 15.8 percent of jobs in the sector, as compared to the 9.6 percent decline in service-sector employment. The most impacted goods-producing industries were construction (-21.1 percent) and manufacturing (-15.7 percent). On the services side, losses were particularly severe in accommodation and food services (-34.3 percent) and retail trade (-14.1 percent), while public administration (-1.8 percent) and finance (-1.9 percent) helped stem the declines. Utilities was the only sector not to lose jobs, with employment flat in April.

Unemployment increased in all provinces, with the highest levels registered in Quebec (17.0 percent), Newfoundland and Labrador (16.0 percent), and Alberta (13.4 percent).

More than one-third (36.7 percent) of workers in the labour force did not work or worked less than half of their usual hours in April, highlighting the continuing impact of the COVID-19 economic shutdown on the economy.

Overall, the aggregate hours worked decreased by 14.9 percent in April compared to March when they fell 15.1 percent—for a combined decline of 27.7 percent since February. This is in line with our expectations and consistent with a deep economic contraction in the second quarter, which we anticipate to be about 50 percent annualized.

Average hourly wages rose 10.8 percent in April from a year ago, reflecting layoffs concentrated in lower-paid industries.

Now that we know how many jobs were lost, we have a better handle on what the recovery will look like.

In April, there were approximately 5.8 million people who did not work and who could reasonably be expected to return to work when public health conditions allow. Of these, about two-thirds (3.8 million) had some type of attachment to a specific job. Either, they were employed but did not work for reasons related to COVID-19, or they had been temporarily laid-off, suggesting that they expect to return to the same job within six months.

Since provincial governments are planning for a gradual reopening of the economy, the labour market recovery will be gradual as well. Moreover, while many laid-off workers will return to their previous jobs, there will still be very high unemployment. Many small and medium-sized businesses will close, leaving their workers with no jobs to return to. This will be taking place amidst a global recession, which will constrain labour demand in Canada. The implication is that it will take years to return to full employment. Many workers will need to change employers, and perhaps even sectors, boosting demand for retraining or upskilling in the post-lockdown period.

US payrolls and labour force

The US economy lost 20.5 million jobs during the month of April—more than one in eight—besting Wall Street expectations but still in the ballpark of the expected decline of 22 million. This marks the largest decline on record (going back to 1939) and comes after a loss of 870 thousand jobs during March.

More than 23 million Americans were out of work in April as layoffs related to COVID-19 containment measures were implemented. The jobless rate surged more than 10 percentage points to 14.7 percent, again less than the consensus for 16 percent and setting a record high for the series (going back to 1948). Including marginally attached workers and those working part-time for economic reasons, the broader jobless rate jumped to 22.8 percent.

No major industry was spared the layoffs in April. Leisure and hospitality borne the brunt of the pain losing 7.7 million jobs during the month—nearly half of its entire workforce. Retail trade, professional & business services, and health care lost more than 2 million jobs each. Manufacturing (-1.3 million), other services (-1.2 million), construction (-975 thousand), and government (-980 thousand) also experienced sizeable declines.

Hourly wages jumped $1.34 on average—boosting wage growth to 7.9 percent year-over-year, likely reflecting the loss of many low-wage positions due to the lockdown.

Markets took the momentous report relatively in stride. The better than expected headlines provided support for equities, while the acceleration in wage growth helped lift bond yields and the greenback.

Economic Insights

A regularly updated snapshot by Deloitte Economics that provides commentary from Chief Economist, Craig Alexander on the latest developments shaping Canadian and international economies including, economic growth, business investment, trade, and market activity. Deloitte analysis gives you the knowledge to tackle the most challenging business issues of today.

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