Globally, there is a sense that we are moving from anxiety over the steep economic decline to thinking about how to the address the future recovery. This can be observed in shifts in financial market sentiment and in commentary from policymakers abroad. It likely reflects the improving economic conditions in Asia (many are watching China and other countries for perspectives on what a new normal looks like when containment is relaxed) as well as signs that the Europe is bending the curve on new cases. This is constructive and it is why we launched the Deloitte Recovery Dashboard to help firms think about where we are in the cycle.
Another day and another change to the announced federal wage subsidy program. Prime Minister Trudeau said that businesses will be eligible if they experienced a 15 percent decline in revenue in March – versus the original 30 percent – reflecting the implementation mid-month. He also noted that the reference month for eligibility of the program is March, February or January. Not-for-profits may include or exclude the government subsidy when calculating loss of revenue.
One question that I am often receiving is what about wage subsidies to help startups? They aren’t eligible because they don’t have the revenue decline. I suspect that many small businesses will still fail during this dramatic economic decline. So while policies targeting startups aren’t at the top of the priority list at the moment, I suspect that when we see improvement in health outcomes and we can start thinking about relaxing containment, finding ways to incent startups will become very important.
Employers that take advantage of the Canada Summer Jobs (CSJ) program will get a subsidy of up to 100 percent to cover the cost of hiring 70,000 students this summer, and the jobs can be full-time or part-time. This is an excellent addition. Youths are a segment of the labour market hit hardest during economic downturns, as not only is there lower labour demand but youths also have to compete for jobs with experienced workers that have been laid off. So, fully subsidizing a significant number of summer jobs is a positive step. New graduating students will benefit from the federal 75 percent wage subsidy if they are recruited by firms that have had a large decline in revenues, but it might be worth thinking about helping new graduates competing in a tough labour market for jobs at firms that don’t qualify for the wage subsidy.
Canadian housing starts fell 7.3 percent to 195.2k in March from February, with the weakness concentrated in multi-family units. This should be viewed as where residential home construction stood before the coming plunge in the second quarter. This view is supported by a preliminary flash estimate of building permits by Statistics Canada. Normally, the statistical agency data is lagged two months, but they published preliminary numbers for March – this is a decision that Stats Can should be congratulated on and we hope this will occur with other releases as well. Build permits fell 23.2 percent last month from year-earlier levels. This will be reflected in lower construction in the months ahead.
Municipalities in central Canada showed the largest declines, reflecting the declared emergencies in Ontario and Quebec mid-March. In Montréal, the number of permits filed declined 37.6 percent in March compared with the same period a year earlier. In Ontario, the value of building permits issued fell by 50.5 percent compared with March 2019.
Craig Alexander is the first Chief Economist at Deloitte Canada. He has over twenty years of experience in the private sector as a senior executive and leading economist in applied economics and forecasting. He performed macroeconomic research, regional and sector analysis, and fiscal market forecasting and modelling. Craig is a passionate public speaker and holds a graduate degree in Economics from the University of Toronto.