Show Transcript
The Canadian economy added almost 1 million jobs in June. But is this bounce-back temporary? Anthony Okolie speaks with Brian DePratto, Senior Economist, TD Bank, about the pace of the economic recovery as well as the state of business investment and consumer sentiment.
Print Transcript
- Brian, this morning, the jobs report was just released, and it was a blockbuster-- nearly 1 million jobs added. What stood out for you?
- It's tempting to say just the strength of the headline, but more than that, I would say it's the labor force recovery. We saw nearly 800,000 people rejoining job markets, looking for work or going back to work. This is a big change. This was an area during the depths of the pandemic where you saw people just completely pulling out, not even looking for work-- understandably, of course.
And so I think the fact that we've seen that big strength, how that unemployment rate improved, but a little higher than we would have thought, just because we have more people coming back in, a real kind of confidence that people are willing to get out there, willing to get back into the office, get back into retail stores. I think that's a very encouraging sign.
And the other aspect of it for me was the original story. We've seen more evidence here that, as the lockdowns have been lifted, as the curve has been bent, people do start to get back to work. You do see a recovery. New Brunswick stands out in that regard. They did a good job controlling this thing pretty early. They've had an early reopening, and now their labor market, employment's just about 3% shy of pre-pandemic levels-- a very strong recovery there.
- Now, we know we've recovered about 40% of the jobs lost since March. Where do you see this maxing out?
- For me, I don't know that maxing out is the question. I think it's when do you get back there. We can easily envision going back to February levels, if not even more. The question is, how long does it take? The risk for me, or what I'm worried about is that we're seeing a lot of the low-hanging fruit right now. A lot of industries that can reopen relatively easily with adaptation are doing so, but there's a lot of others-- I'm thinking restaurants, more broadly defined it would be inside dining, sporting events, things like that-- where it's going to be a lot longer and a more challenging environment there. So I think we're looking at at least a year, year and a half until we're looking back at those pre-crisis level, let alone seeing meaningful growth above that.
- OK, so I want to shift over to talking about the Bank of Canada's latest survey on business investment and consumer expectations. Let's first start with the business investment survey. What's your take there?
- There was not a huge surprise here. We are in the midst of a recession right now, or at least emerging from one, so it's not too shocking to see recession-like indicators there. Things like 30%, on net, of the respondents planning to shrink their M&E, no big surprise there, given just the extreme degree of uncertainty, and frankly, the uncertainty more beyond our borders, looking at the export sector, things like that. It's a safe bet that the borders are going to remain very thick for some time longer.
What surprised me and stood out in that survey was a fairly resilient hiring profile. That did not look recession-like. We saw a pullback, but still in positive territory on that. So maybe more of that optionality there. But again, we're seeing a lot of caution.
- Another thing I found surprising, as well, is that companies said that they're planning to increase their spending on IT and technology. What's behind that? What's driving that decision?
- I mean, just look at how we're having our conversation now. Everyone's moving remotely. Things are being done over video, over various tools, like Zoom and things like that. And so companies are, I think, adapting to that. And again, there's an optionality element to that, as well. A lot of these services do tend to be subscription-based. So just as you can ramp that up to accommodate the needed distancing we have now, it's pretty easy to sort of turn those paths off on the other side, as well. But I think it's pretty appealing as a response for a lot of these companies.
- Canadian consumer trends-- anything notable there?
- You know, it's what we've all been living through, really. Not to make a joke of it, but when you see the data on the spending patterns, it's been a big shift from stuff away from home to where things are at home. So you look at spending on things like travel, accommodation, restaurant meals, very, very low. Some recovery seen in some of the restaurants, but for travel, it's almost flatlined there. The flip side of that is people spending much more on groceries, spending much more on home improvement, things like that. If you're forced to nest at home for a little while, a lot of people are making the effort to try to make it a little more comfortable, I think.
- So we just have a few seconds left, but given what we know from the survey and the jobs data, what's the one thing that Canadians should take away from this news?
- We're moving in the right direction, but it's a very long road ahead. We're still about 1.8 million jobs shy of where we were. We're still seeing a lot of challenges in a lot of sectors. So I think we can be a little bit optimistic, or more optimistic than we might have been, but very clearly, we've got to be ready for the long haul.
- Brian, thank you very much for your insights.
- Thank you for having me.
[MUSIC PLAYING]
- It's tempting to say just the strength of the headline, but more than that, I would say it's the labor force recovery. We saw nearly 800,000 people rejoining job markets, looking for work or going back to work. This is a big change. This was an area during the depths of the pandemic where you saw people just completely pulling out, not even looking for work-- understandably, of course.
And so I think the fact that we've seen that big strength, how that unemployment rate improved, but a little higher than we would have thought, just because we have more people coming back in, a real kind of confidence that people are willing to get out there, willing to get back into the office, get back into retail stores. I think that's a very encouraging sign.
And the other aspect of it for me was the original story. We've seen more evidence here that, as the lockdowns have been lifted, as the curve has been bent, people do start to get back to work. You do see a recovery. New Brunswick stands out in that regard. They did a good job controlling this thing pretty early. They've had an early reopening, and now their labor market, employment's just about 3% shy of pre-pandemic levels-- a very strong recovery there.
- Now, we know we've recovered about 40% of the jobs lost since March. Where do you see this maxing out?
- For me, I don't know that maxing out is the question. I think it's when do you get back there. We can easily envision going back to February levels, if not even more. The question is, how long does it take? The risk for me, or what I'm worried about is that we're seeing a lot of the low-hanging fruit right now. A lot of industries that can reopen relatively easily with adaptation are doing so, but there's a lot of others-- I'm thinking restaurants, more broadly defined it would be inside dining, sporting events, things like that-- where it's going to be a lot longer and a more challenging environment there. So I think we're looking at at least a year, year and a half until we're looking back at those pre-crisis level, let alone seeing meaningful growth above that.
- OK, so I want to shift over to talking about the Bank of Canada's latest survey on business investment and consumer expectations. Let's first start with the business investment survey. What's your take there?
- There was not a huge surprise here. We are in the midst of a recession right now, or at least emerging from one, so it's not too shocking to see recession-like indicators there. Things like 30%, on net, of the respondents planning to shrink their M&E, no big surprise there, given just the extreme degree of uncertainty, and frankly, the uncertainty more beyond our borders, looking at the export sector, things like that. It's a safe bet that the borders are going to remain very thick for some time longer.
What surprised me and stood out in that survey was a fairly resilient hiring profile. That did not look recession-like. We saw a pullback, but still in positive territory on that. So maybe more of that optionality there. But again, we're seeing a lot of caution.
- Another thing I found surprising, as well, is that companies said that they're planning to increase their spending on IT and technology. What's behind that? What's driving that decision?
- I mean, just look at how we're having our conversation now. Everyone's moving remotely. Things are being done over video, over various tools, like Zoom and things like that. And so companies are, I think, adapting to that. And again, there's an optionality element to that, as well. A lot of these services do tend to be subscription-based. So just as you can ramp that up to accommodate the needed distancing we have now, it's pretty easy to sort of turn those paths off on the other side, as well. But I think it's pretty appealing as a response for a lot of these companies.
- Canadian consumer trends-- anything notable there?
- You know, it's what we've all been living through, really. Not to make a joke of it, but when you see the data on the spending patterns, it's been a big shift from stuff away from home to where things are at home. So you look at spending on things like travel, accommodation, restaurant meals, very, very low. Some recovery seen in some of the restaurants, but for travel, it's almost flatlined there. The flip side of that is people spending much more on groceries, spending much more on home improvement, things like that. If you're forced to nest at home for a little while, a lot of people are making the effort to try to make it a little more comfortable, I think.
- So we just have a few seconds left, but given what we know from the survey and the jobs data, what's the one thing that Canadians should take away from this news?
- We're moving in the right direction, but it's a very long road ahead. We're still about 1.8 million jobs shy of where we were. We're still seeing a lot of challenges in a lot of sectors. So I think we can be a little bit optimistic, or more optimistic than we might have been, but very clearly, we've got to be ready for the long haul.
- Brian, thank you very much for your insights.
- Thank you for having me.
[MUSIC PLAYING]
