Quick take

Further job losses in May as third wave lingers

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The Conference Board of Canada’s Economist Liam Daly offers the following insights on May’s Labour Force Survey (LFS):

The employment declines captured in May’s labour force survey results reflect the lingering impact of the third wave of the pandemic in Canada. However, the severity of the losses is reduced compared to the previous month indicating the peak of the wave has passed. With several provinces now embarking on reopening plans, we should see the labour market respond positively over the coming months.

  • A second consecutive fall in employment was recorded in May. Although the decline was smaller than the previous month, the number of people employed fell by 68,000. This decline caused the unemployment rate to inch up to 8.2 per cent. These results reflect the lingering impact of restrictions aimed at curbing the third wave of the pandemic.
  • Despite this May’s numbers, the worst of the third wave has now passed and relative to the second wave in January the effects on the labour market have been milder, both in terms of job losses and declines in labour force participation.
  • A notable feature of May’s losses was the fall in employment among goods-producing sectors of the economy. Relative to several service industries, which are particularly sensitive to prevailing COVID-19 conditions, goods-producing industries have thus far shown a degree of resilience to the pandemic thanks to in-work safety measures and exemptions from mandatory closures.
  • However, significant employment declines occurred in both manufacturing (-35,900) and construction (-15,800) industries. The decline in employment in manufacturing is the first since April 2020. Of the losses within the industry, 78 per cent occurred in Ontario and Quebec, reflecting a combination of COVID-19 restrictions and the continuing computer chip shortage that has disrupted production in the auto industry.
  • The employment decline in construction was concentrated Ontario where public health measures restricted activity within the industry.
  • Among the service industries, losses were concentrated in the wholesale and retail trade (- 21,200) and other services (-24,100). With Ontario expected to reopen non-essential business in the coming days we expect a significant portion of these losses to be recovered as soon as public health measures permit.
  • A stand-out sector in this month’s survey was the transportation and warehousing industry which added 21,900 jobs. The industry has been one of the worse affected partly due to falls in commuting and travel over the last year. This month’s employment gains bring the industry to within 4 per cent of per-pandemic levels.
  • Employment rose by 8,600 in the natural resources sector. Strong demand for commodities including oil, wood and mining products is driving up activity in this sector.
  • A survey of the provinces reveals a divergent picture which continues to closely reflect the state of the pandemic in each region.
  • The provinces of Ontario (-31,600) and Nova Scotia (-22,200) bore the brunt of the job losses this month. Employment also fell in Quebec (-8,000), New Brunswick (-2,700) and Newfoundland and Labrador (-2,100).
  • Of the Prairies and the Western provinces, employment in British Columbia, Alberta and Manitoba remained essentially flat.
  • Only Saskatchewan and Prince Edward Island saw employment rise in May, though in both cases the increase was modest.
  • This month’s labour force survey may well mark an inflection point in the trajectory of the labour market recovery. Over the month of May several regions have taken steps to ease public health measures and will aim to continue along a path of reopening as we move into the summer. As vaccination programs progress, there is reason to be optimistic that Canada is moving into a less volatile stage of the pandemic marked by a more consistent pattern of employment growth especially among several badly affected service industries.

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Liam Daly

Liam Daly

Economist

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