McCreath: April was a good month for stocks
Canada’s job recovery hit a snag in April as a third wave of lockdowns and COVID-19 restrictions led to fresh employment losses.
The country shed 207,100 jobs last month, Statistics Canada reported Friday from Ottawa, partially erasing large gains over the previous two months. Economists in a Bloomberg survey had predicted a drop of 150,000. The unemployment rate rose to 8.1 per cent in April, from 7.5 per cent a month earlier. The rate was below 6 per cent before the pandemic.
Despite the setback, analysts expect a quick rebound as early as June once containment measures have been lifted with the economy back on track toward full recovery -- as was the case after previous lockdowns. The bulk of the losses were limited to pandemic-exposed sectors, like retail, food and accommodation, a sign that the slowdown isn’t broad-based.
“Today’s jobs data doesn’t change the structural backdrop for the Canadian economic recovery,” Simon Harvey, a senior foreign exchange analyst at Monex Canada, said by email.
Canada’s economy remains about half a million jobs shy of pre-pandemic levels. The Canadian dollar was little changed after the report. The yield on Canada’s 10-year benchmark bond dipped to 1.49 per cent as of 9:30 a.m. in Toronto, from a close of 1.514 per cent on Thursday.
The U.S. Labor Department also released soft jobs data Friday that were even more disappointing. U.S. payrolls increased by just 266,000, versus estimates for a 1 million gain.
“Today is a concerning day,” Frances Donald, global chief economist and head of macro strategy at Manulife Investment Management, told BNN Bloomberg television. The U.S.’s scant job creation is a sign of possible future headwinds because Canada has trailed the U.S.’s growth trajectory by six to nine months, she said.
Overall, Canada’s labor market has recovered more quickly than in the U.S. It’s one of the key reasons why the Bank of Canada has indicated it’s prepared to start paring back its stimulus before the Federal Reserve, though the soft jobs data on both sides of the border could prompt a rethink on the pace of withdrawal.
The Bank of Canada curbed its purchases of Canadian government bonds in April, and is expected to do so again in coming months as the recovery accelerates.
“April will be a very weak month for the economy,” Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets, said by email. “Those who thought the Bank of Canada might taper again in July might have a rethink.”
Rising virus cases due to a combination of rapidly spreading variants and a vaccine rollout plagued by delays and confusion prompted Canadian authorities in recent weeks to reintroduce strict containment measures that hit jobs in close-contact sectors.
Friday’s jobs numbers suggest a tough start for the nation’s economy in the second quarter. Hours worked -- which is closely correlated to output -- fell 2.7 per cent in April, the biggest monthly drop since the depths of the recession. April also saw the first drop in full time employment -- down 129,400 -- in a full year.
Still, the country has a strong track record of bouncing back after prior waves of the virus, bolstering confidence it will do the same again.
“The good news is that the curve is bending in some regions of the country and vaccinations are picking up pace, both of which should help the labor market begin to recover as the summer gets rolling.,” Royce Mendes, an economist at Canadian Imperial Bank of Commerce, said by email. “Evidence from the recoveries after past waves suggest job growth can show up relatively quickly after virus cases are brought under control.”