Canadian Employment (Apr) - May 8, 2020
Canadian employment fell further in April by 2 million jobs (-11%, m/m), bringing cumulative losses to 3 million since February. The unemployment rate rose by 5.3 percentage points from 7.8% to 13%, as the impact from the closure of non-essential businesses and travel restrictions were not fully reflected in last month's job report. The last recession to come close to this was 1981/82 when the peak unemployment rate was 13.1%. The unemployment rate would have been 17.8% in April if adjusted to include those wanting to work (and had worked recently), but were unable to because of the pandemic.
Job losses continued to spread across the country, with the largest declines in Ontario (-690k), Quebec (-560k), BC (-264k) and Alberta (-240k). The decline in employment was driven by the private sector (-1.87 million), while the public sector reported a smaller decline of -76.8k and self-employed were down by -43.1k. The most impacted industries continue to be in the service-sector, led by wholesale and retail trade (-14%) and accommodation and food services (-34.3%). The impact also spilled over to the goods-producing sector in April, led by declines in construction (-314K) and manufacturing (-267k), partially due to the closure of all construction sites in Quebec at the end of March. Compared to the same month last year, Canadian employment was down by -15% (-2.8 million).
Meanwhile, employment in BC fell by 264,000 jobs (-11%, m/m) in April, increasing the provincial unemployment rate by 4.3 percentage points from 7.2% to 11.5%. Three-quarters of the decline was in full-time work. Employment was down in all industries except for utilities. Compared to one year ago, employment in BC was down by 16.4% (-421k) jobs.
As restrictions around the pandemic are gradually eased in many provinces, we can expect some people to start returning to work, or have their hours worked increase. The magnitude and timing will largely depend on businesses and employees' willingness to return to work given ongoing health concerns. In April, there were about 3.8 million people who had some type of attachment to a specific job but were not working due to the pandemic, suggesting that they could return to the same job in the coming months.
Canadian employment fell further in April by 2 million jobs (-11%, m/m), bringing cumulative losses to 3 million since February. The unemployment rate rose by 5.3 percentage points from 7.8% to 13%, as the impact from the closure of non-essential businesses and travel restrictions were not fully reflected in last month's job report. The last recession to come close to this was 1981/82 when the peak unemployment rate was 13.1%. The unemployment rate would have been 17.8% in April if adjusted to include those wanting to work (and had worked recently), but were unable to because of the pandemic.
Job losses continued to spread across the country, with the largest declines in Ontario (-690k), Quebec (-560k), BC (-264k) and Alberta (-240k). The decline in employment was driven by the private sector (-1.87 million), while the public sector reported a smaller decline of -76.8k and self-employed were down by -43.1k. The most impacted industries continue to be in the service-sector, led by wholesale and retail trade (-14%) and accommodation and food services (-34.3%). The impact also spilled over to the goods-producing sector in April, led by declines in construction (-314K) and manufacturing (-267k), partially due to the closure of all construction sites in Quebec at the end of March. Compared to the same month last year, Canadian employment was down by -15% (-2.8 million).
Meanwhile, employment in BC fell by 264,000 jobs (-11%, m/m) in April, increasing the provincial unemployment rate by 4.3 percentage points from 7.2% to 11.5%. Three-quarters of the decline was in full-time work. Employment was down in all industries except for utilities. Compared to one year ago, employment in BC was down by 16.4% (-421k) jobs.
As restrictions around the pandemic are gradually eased in many provinces, we can expect some people to start returning to work, or have their hours worked increase. The magnitude and timing will largely depend on businesses and employees' willingness to return to work given ongoing health concerns. In April, there were about 3.8 million people who had some type of attachment to a specific job but were not working due to the pandemic, suggesting that they could return to the same job in the coming months.
Canadian Monthly Real GDP (February) - April 30, 2020
After three months of growth, Canadian real GDP was essentially flat in February as disruptions to education services and the transportation and warehousing sector stalled the economy. Excluding those sectors, economic growth was 0.2 per cent with 13 of 20 sub-sectors recording increased output. Activity in the real estate sector rose 5.9 per cent in February, the largest increase since December 2017.
Statistics Canada has also made a flash estimate for March 2020 real GDP which it estimates declined a staggering 9 per cent on a monthly basis due to the COVID-19 pandemic and associated mitigation measures. If that estimate is accurate, first quarter real GDP will contract by close to 10 per cent on an annualized basis. As dramatic as the first quarter decline appears, it will almost certainly be quickly overshadowed by what most expect to be a 30 per cent or more annualized decline in the second quarter. Note that those are annualized estimates. The actual peak-to-trough decline in Canadian real GDP is estimated at 10-15 per cent before things begin to normalize and growth rebounds in the third and fourth quarter of this year.
After three months of growth, Canadian real GDP was essentially flat in February as disruptions to education services and the transportation and warehousing sector stalled the economy. Excluding those sectors, economic growth was 0.2 per cent with 13 of 20 sub-sectors recording increased output. Activity in the real estate sector rose 5.9 per cent in February, the largest increase since December 2017.
Statistics Canada has also made a flash estimate for March 2020 real GDP which it estimates declined a staggering 9 per cent on a monthly basis due to the COVID-19 pandemic and associated mitigation measures. If that estimate is accurate, first quarter real GDP will contract by close to 10 per cent on an annualized basis. As dramatic as the first quarter decline appears, it will almost certainly be quickly overshadowed by what most expect to be a 30 per cent or more annualized decline in the second quarter. Note that those are annualized estimates. The actual peak-to-trough decline in Canadian real GDP is estimated at 10-15 per cent before things begin to normalize and growth rebounds in the third and fourth quarter of this year.
Bank of Canada Interest Rate Announcement - April 15, 2020
The Bank of Canada maintained its overnight policy rate at 0.25 per cent this morning, a level it considers to be its effective lower bound. The Bank also announced additional new measures to support the Canadian financial system. In its statement, the bank noted that efforts necessary to contain the spread of COVID-19 have caused a sudden and deep contraction in economic activity and employment worldwide. The bank judges the current outlook to be too uncertain to provide a complete forecast, though it expects real GDP growth to decline 1-3 per cent in the first quarter of 2020 and a further 15-30 per cent (annualized) drop in the second quarter.
To offset any potential dysfunction in financial markets and to keep credit channels operating smoothly, the Bank will continue its purchase of Government of Canada as well as provincial government, and even investment grade corporate bonds in the secondary market. These measures, along with those implemented by the Federal Government, will help to ease pressure on Canadian borrowers at all levels, from large corporations, to small businesses to households.
The Bank of Canada maintained its overnight policy rate at 0.25 per cent this morning, a level it considers to be its effective lower bound. The Bank also announced additional new measures to support the Canadian financial system. In its statement, the bank noted that efforts necessary to contain the spread of COVID-19 have caused a sudden and deep contraction in economic activity and employment worldwide. The bank judges the current outlook to be too uncertain to provide a complete forecast, though it expects real GDP growth to decline 1-3 per cent in the first quarter of 2020 and a further 15-30 per cent (annualized) drop in the second quarter.
To offset any potential dysfunction in financial markets and to keep credit channels operating smoothly, the Bank will continue its purchase of Government of Canada as well as provincial government, and even investment grade corporate bonds in the secondary market. These measures, along with those implemented by the Federal Government, will help to ease pressure on Canadian borrowers at all levels, from large corporations, to small businesses to households.
Bank of Canada Interest Rate Announcement - March 27, 2020
For the second time this month, the Bank of Canada has lowered its overnight policy rate before its regularly scheduled announcement date, taking the overnight rate down a further 50 basis points to 0.25 per cent. That level is what the Bank considers its effective lower bound, meaning it can not reduce rates further without potentially disrupting key short-term funding markets.
The Bank also announced two new programs to ensure the continued smooth functioning of credit markets and to promote credit availability. The first, the Commercial Paper Purchase Program, is targeted at alleviating strains in the short-term funding market and the second entails the Bank purchasing Government of Canada bonds in the secondary market. The latter program is a type of what is generally called "quantitative easing" though the Bank's program is targeted at all maturities, rather than longer term yields as in traditional quantitative easing.
All of these actions represent a serious and significant amount of firepower aimed at keeping the Canadian financial system and credit markets functioning during this extraordinary time. If successful, we should see currently elevated risk spreads on mortgage products start to decline, reversing recent increases in Canadian mortgage rates.
For the second time this month, the Bank of Canada has lowered its overnight policy rate before its regularly scheduled announcement date, taking the overnight rate down a further 50 basis points to 0.25 per cent. That level is what the Bank considers its effective lower bound, meaning it can not reduce rates further without potentially disrupting key short-term funding markets.
The Bank also announced two new programs to ensure the continued smooth functioning of credit markets and to promote credit availability. The first, the Commercial Paper Purchase Program, is targeted at alleviating strains in the short-term funding market and the second entails the Bank purchasing Government of Canada bonds in the secondary market. The latter program is a type of what is generally called "quantitative easing" though the Bank's program is targeted at all maturities, rather than longer term yields as in traditional quantitative easing.
All of these actions represent a serious and significant amount of firepower aimed at keeping the Canadian financial system and credit markets functioning during this extraordinary time. If successful, we should see currently elevated risk spreads on mortgage products start to decline, reversing recent increases in Canadian mortgage rates.
Bank of Canada Interest Rate Announcement - March 13, 2020
Today, in an emergency inter-meeting policy action, the Bank of Canada again lowered its overnight rate by 50 basis points to 0.75 per cent. This follows the previous cut to 1.25 per cent on March 4, 2020. This move is in response to the spread of COVID-19, which according to the Bank is "having serious consequences for Canadian families, and for Canada's economy". In its statement, the Bank noted that lower interest rates will help to support confidence in households by lowering borrowing costs for new purchases and for those renewing their mortgages. Additionally, lower prices for oil will weigh heavily on the economy.
We expect this rate cut to be followed by an additional reduction of the Bank's overnight rate at its April 2020 meeting.
Today, in an emergency inter-meeting policy action, the Bank of Canada again lowered its overnight rate by 50 basis points to 0.75 per cent. This follows the previous cut to 1.25 per cent on March 4, 2020. This move is in response to the spread of COVID-19, which according to the Bank is "having serious consequences for Canadian families, and for Canada's economy". In its statement, the Bank noted that lower interest rates will help to support confidence in households by lowering borrowing costs for new purchases and for those renewing their mortgages. Additionally, lower prices for oil will weigh heavily on the economy.
We expect this rate cut to be followed by an additional reduction of the Bank's overnight rate at its April 2020 meeting.
Bank of Canada Interest Rate Announcement - March 4, 2020
The Bank of Canada lowered its overnight rate by 50 basis points this morning to 1.25 per cent. This move is part of a coordinated action by global central banks to guard against the negative consequences of the Coronavirus outbreak. In its statement, the Bank noted that although the Canadian economy is operating near potential and inflation is at its 2 per cent target, the Coronavirus is a material and negative shock to the Canadian and global outlook.
Economic growth in Canada slowed sharply to end 2019 and supply chain disruptions due to both Coronavirus and interrupted rail service are expected to slow growth further in the first quarter of this year.
Canadian bond yields have declined significantly with 5-year bond yields falling below 1% for the first time since 2017. Both variable and 5-year fixed qualifying mortgage rates will likely follow bond yields lower, though elevated risk spreads may delay banks and other lenders in lowering mortgage rates in the immediate term.
The Bank of Canada lowered its overnight rate by 50 basis points this morning to 1.25 per cent. This move is part of a coordinated action by global central banks to guard against the negative consequences of the Coronavirus outbreak. In its statement, the Bank noted that although the Canadian economy is operating near potential and inflation is at its 2 per cent target, the Coronavirus is a material and negative shock to the Canadian and global outlook.
Economic growth in Canada slowed sharply to end 2019 and supply chain disruptions due to both Coronavirus and interrupted rail service are expected to slow growth further in the first quarter of this year.
Canadian bond yields have declined significantly with 5-year bond yields falling below 1% for the first time since 2017. Both variable and 5-year fixed qualifying mortgage rates will likely follow bond yields lower, though elevated risk spreads may delay banks and other lenders in lowering mortgage rates in the immediate term.
Source from BCREA