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Canada and the U.S. both added jobs for the month of July. Anthony Okolie talks with James Orlando, Senior Economist, TD Bank, about the positive job momentum, the factors behind the job gain, and what that could mean for the economic recovery.
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- The Canadian jobs numbers were just released for July, and it was better than expected. It's the third month in a row that Canada added net new jobs. James, what's your take?
- Yeah, it was another welcome report, Anthony. We gained over 400,000 jobs in Canada for the current month, and you're right. Three months in a row of positive gains, and it's just another sign that the economic recovery in Canada is well underway.
- And which sectors so far have seen the biggest rebound post-COVID-19, and has the quality of jobs changed from previous months?
- Yeah, it's an interesting question. When we look at the sectors that have performed the best over the last three months, they're also the sectors that performed the worst over the February to March time period. And so you think about the businesses of the sectors that were impacted the most, and we're looking at food services, accommodation, retail where a lot of these businesses effectively closed and people lost their jobs. Now, as we're having this reopening in Canada, a lot of those jobs are coming back. So that's a welcome sign.
With respect to job quality, that's also very interesting. One disappointing aspect of this report was the fact that over 80% of the jobs gained over the last month are actually part-time jobs. Now, this goes to a big trend that we're seeing right now where over 1 million Canadians are working less hours than what they want to be. And when we think about what that means for Canadians, what that is implying is that a lot of people that are coming back that might have lost their jobs before are coming back at hours less than what they want. And when you have that, that just means they're making less income than what they want. And that's something that is certainly what we're watching to see whether this recovery is going to be as strong as what we were hoping for.
- And now we're halfway to recovering the more than 3 million jobs lost in March and April. How much longer do you think it will take to get to pre-COVID-19 levels, or where do you see this maxing out?
- Yeah, so the last three months have been-- the gains have been really robust, but that comes from a really low base. Now, reopening is happening. We're seeing the jobs come back. We also have the stage three happening in Toronto and Peel. So the next month's report, we have some signals that that report's going to be looking pretty good as well.
But there is a point where we're going to be going from that initial bounce-back stage to the recovery stage, and what we know from past recessions is that recovery stage is actually a little bit slower than what we and what most people are hoping for. And what we're expecting is that to get back to full employment in Canada, that's going to be a process that's going to take a few years to get back to.
And so, yes, job gains are going to be slowing from what we've seen over the last few months. But as long as they're moving in the right direction, we're pretty happy with that.
- US jobs numbers in July were also better than expected, but the rehiring has slowed from May and June. James, what do read from this?
- It's a very similar story to what happened in Canada where the job gains are less this last month than the previous month, and it just reflects the fact that we went from bouncing off the bottom to this recovery stage.
When we look at the United States, though, we talk about Canada having recovered more than 50% of the job losses from February and March. The US is only about 42% recovered, and a lot of that has to do with the fact that during the summer months, there has been a second wave of COVID-19 infections in the United States which has definitely slowed the recovery in the US relative to what happened in Canada. So that's something that we're watching for to see, how fast one country is able to recover than another country.
- Of course, another thing that investors are watching is the discussions on Congress about a new relief bill. And, of course, the $600 in the weekly federal jobs benefits expired at the end of July, but again, there's still no agreement on a new stimulus plan. What impact will this delay have on the US labor market?
- So one thing we've learned from this entire COVID-19 pandemic was the fact that government support for the incomes of citizens is hugely important. And so what you're talking about is sort of an income cliff, potentially, for a lot of people. Their incomes were being supported by the government just to kind of build a bridge during this time period.
And that support has certainly helped retail sales, for example, in the United States. And the idea of people not having as much money means that they're not going to have as much money to spend, and that means that sectors such as retail would certainly be impacted if they're not able to reach a deal for more federal-government support.
- OK, James, so bottom line, what do these jobs numbers tell you about the path to recovery?
- Overall, both reports in Canada and the United States were welcome. They show that the reopening is having a positive effect on job creation and that we're having strong job momentum in both countries right now, which bodes well for the citizens of Canada and the United States and bodes well for the future path of this economic recovery.
- James, thank you very much for your insights and analysis.
- Thank you.
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- Yeah, it was another welcome report, Anthony. We gained over 400,000 jobs in Canada for the current month, and you're right. Three months in a row of positive gains, and it's just another sign that the economic recovery in Canada is well underway.
- And which sectors so far have seen the biggest rebound post-COVID-19, and has the quality of jobs changed from previous months?
- Yeah, it's an interesting question. When we look at the sectors that have performed the best over the last three months, they're also the sectors that performed the worst over the February to March time period. And so you think about the businesses of the sectors that were impacted the most, and we're looking at food services, accommodation, retail where a lot of these businesses effectively closed and people lost their jobs. Now, as we're having this reopening in Canada, a lot of those jobs are coming back. So that's a welcome sign.
With respect to job quality, that's also very interesting. One disappointing aspect of this report was the fact that over 80% of the jobs gained over the last month are actually part-time jobs. Now, this goes to a big trend that we're seeing right now where over 1 million Canadians are working less hours than what they want to be. And when we think about what that means for Canadians, what that is implying is that a lot of people that are coming back that might have lost their jobs before are coming back at hours less than what they want. And when you have that, that just means they're making less income than what they want. And that's something that is certainly what we're watching to see whether this recovery is going to be as strong as what we were hoping for.
- And now we're halfway to recovering the more than 3 million jobs lost in March and April. How much longer do you think it will take to get to pre-COVID-19 levels, or where do you see this maxing out?
- Yeah, so the last three months have been-- the gains have been really robust, but that comes from a really low base. Now, reopening is happening. We're seeing the jobs come back. We also have the stage three happening in Toronto and Peel. So the next month's report, we have some signals that that report's going to be looking pretty good as well.
But there is a point where we're going to be going from that initial bounce-back stage to the recovery stage, and what we know from past recessions is that recovery stage is actually a little bit slower than what we and what most people are hoping for. And what we're expecting is that to get back to full employment in Canada, that's going to be a process that's going to take a few years to get back to.
And so, yes, job gains are going to be slowing from what we've seen over the last few months. But as long as they're moving in the right direction, we're pretty happy with that.
- US jobs numbers in July were also better than expected, but the rehiring has slowed from May and June. James, what do read from this?
- It's a very similar story to what happened in Canada where the job gains are less this last month than the previous month, and it just reflects the fact that we went from bouncing off the bottom to this recovery stage.
When we look at the United States, though, we talk about Canada having recovered more than 50% of the job losses from February and March. The US is only about 42% recovered, and a lot of that has to do with the fact that during the summer months, there has been a second wave of COVID-19 infections in the United States which has definitely slowed the recovery in the US relative to what happened in Canada. So that's something that we're watching for to see, how fast one country is able to recover than another country.
- Of course, another thing that investors are watching is the discussions on Congress about a new relief bill. And, of course, the $600 in the weekly federal jobs benefits expired at the end of July, but again, there's still no agreement on a new stimulus plan. What impact will this delay have on the US labor market?
- So one thing we've learned from this entire COVID-19 pandemic was the fact that government support for the incomes of citizens is hugely important. And so what you're talking about is sort of an income cliff, potentially, for a lot of people. Their incomes were being supported by the government just to kind of build a bridge during this time period.
And that support has certainly helped retail sales, for example, in the United States. And the idea of people not having as much money means that they're not going to have as much money to spend, and that means that sectors such as retail would certainly be impacted if they're not able to reach a deal for more federal-government support.
- OK, James, so bottom line, what do these jobs numbers tell you about the path to recovery?
- Overall, both reports in Canada and the United States were welcome. They show that the reopening is having a positive effect on job creation and that we're having strong job momentum in both countries right now, which bodes well for the citizens of Canada and the United States and bodes well for the future path of this economic recovery.
- James, thank you very much for your insights and analysis.
- Thank you.
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