Anthony Okolie speaks with Derek Burleton, Deputy Chief Economist, TD Bank about the massive job losses and whether governments’ fiscal measures will be enough to get economies back on track.
More than a million Canadians lost their jobs in March with the unemployment rate jumping to 7.8%. That's double what was expected. Every province lost jobs, with the biggest impact being felt in Ontario and Quebec. And it's a similar picture in the US, where weekly jobless claims grew to 6.6 million, bringing the total claims over the past three weeks to more than 16 million. Meanwhile, the US Federal Reserve has released details of a plan to provide $2.3 trillion in new support for the economy. The measures include more support for local governments, small businesses, and consumers.
Speaking of which, a new report shows US consumer sentiment falling to a nine year low as the coronavirus takes its toll on the economy and the jobs market. And finally, federal health officials in Ottawa say under the current public health measures, between 11,000 and 22,000 Canadians could die from COVID-19 in the months ahead. And that's a wrap of your market news. As promised, Moneytalk with Derek Burleton on the latest jobs numbers.
Derek, an unprecedented one million jobs were lost in Canada. That's the largest on record. We saw another 6.6 million jobless claims in the US. That three week total now stands at more than 50 million. That's the highest on record. Give us some context on how big these numbers really are.
- Well, they're massive. We've never seen anything like this. Nor have we ever seen a situation where economies have been stopped almost on a dime. You know, what we're seeing, though, as we move through March, it really depends on what week you're talking. We knew as of mid March, that's when the lockdowns really began to get ramped up. The Canadian employment data today, it's worth noting. The survey period was a week after last week's payroll data for March. So if you're wondering, we saw a million decline in household employment in Canada, only 3 million in the US on a per capita basis, quite a bit less, but that was a week earlier. So as we get more data, the weekly jobless claims in the US is the most timely of data, and those show yet another spike upward.
So hopefully, we start to see containment of the virus soon. Hopefully we start to see economies being reopened, at least to some extent. And the hope is April is going to be disaster for the economic data. Once we get beyond the very near term, we're going to start to see some of these numbers settle down a bit.
- I wanted to dig a little deeper into the Canadian numbers. Which sectors have been impacted the most? Where have we seen most of the job losses?
- Well, not surprisingly, it's really driven by service sector activity. Pretty much the lion's share of losses, about 95% were in the service sector. It's a much bigger sector, but then has been hit in a more pronounced way by COVID-19. So that really was the area of weakness. It was pretty much across the board, albeit not surprisingly in areas like leisure, accommodation, and food were the hardest hit.
And it's interesting. I think one of the most interesting news out of this survey today was the wage growth spiked up to more than 6% year over year in the month of March. It seems to be at odds with the fact employment was down so sharply. But because of the composition of the losses, heavily in part time and service, you take those numbers out of the equation actually leads to higher average wage. So the numbers are just very peculiar these days, and we're going to have to get used to it, because surveys are going to have trouble capturing a lot of these activities relative to what we're used to seeing.
ANTHONY OKOLIE: And certainly we've seen enormous fiscal response by the federal government to date. Has it been enough, or are we just stopping the bleeding here?
- Well, we'll see. You know, the thing that we're looking at is a real disconnect. You're going to see unemployment rates skyrocket. I would imagine for April, we could get numbers between 15% and 20% unemployment in both the US and Canada, but with all these government supports, transfers, both the US and Canadian governments, that's going to help to soften the blow to income, and we do know there are plans for forbearance of a lot of the loans in the household sector that will certainly take some of the pressure off households in the near term.
So I think it will help. Whether it's enough, we'll have to wait and see. We certainly know where the tendency is. We saw this week both governments sweetening programs of support in Canada, the wage subsidy program, which is designed to have employers retain their workers and to bring back furloughed workers because they can get a 75% wage subsidy. The government ended up easing some of those conditions this week, making it easier to qualify, and same thing with some of the key US based programs. The SBA small business lending program, which operates the same way, they're trying to encourage companies to keep workers on payrolls, we're seeing a sweetening in that as well.
So far, the stimulus we're seeing is unprecedented, more than 10% of GDP and overall supports by both governments. We may see that number grow in the coming weeks.
- And so much of the federal government's response has been based on how soon the country can open up again. What's your view on the government's timeline?
- Well, and this is what we're wondering about. Guidance so far is quite vague. And obviously, nobody expects the government to be acting on this right now, given the fact that COVID cases are still on the rise in the US and Canada. But at some point, hopefully in the next few weeks, we'll start to see signs of ebbing, and then we really do need some clear guidelines as to where we're going next, both federally and provincially. In the US, the same thing.
We're looking at Europe right now. Some of the European countries, Austria, Denmark are beginning to ease restrictions because their cases have been falling, and recovery rates have been rising. And they will give us some indication as to what works. But what we do know, it's going to be a very gradual easing in restrictions. It's not going to be business to normal very quickly. It's going to be a very staged approach.
And what I think that suggests is, you know, there was early talk about a V shaped rebound in economies and job markets. It's going to take longer to get back to a more normal level-- I mean, at the very earliest, sometime in 2021. It's going to be a very slow recovery.
- And we just have a few seconds here, and I just quickly want to touch on the Fed announcement of a new $2.3 trillion loan to business and government, just moments after the US weekly jobs data. Just in a few seconds, how much of an impact will this have on the economy?
- I think it's going to have a big impact on the economy. It includes supports for municipal debt in the US, state borrowing, you know, the small business lending program. It's going to lever up investments by the Treasury through its $2 trillion package. $2 trillion is not chump change, and I think we're seeing it already show up some easing in some of the credit pressures we've seen in the credit market. It's a first necessary stage to containing this economic crisis, and it seems to be working, and hopefully, it will be enough.
But it is-- the central banks pretty much around the world are vowing that they're going to use any tools they can, and for the Fed, I think, even more onus on them given that the de facto reserve currency they manage. So it's, I think, a very important step. And it was good to see more specifics in today's announcement.
- Derek, thank you very much for your time.
- Thank you.
- And thank you for joining us. My name is Anthony Okolie. Please join us again soon. Stay safe.