Past recessions give clues to job loss By: Tom Brodbeck Posted: 7:00 PM CDT Friday, May. 8, 2020

Opinion

Hey there, time traveller!
This article was published 07/05/2020 (1597 days ago), so information in it may no longer be current.

One of the most critical economic questions around the COVID-19 pandemic will be how quickly jobs return once social-distancing restrictions are eased. If past downturns are any indication, service-based employment should bounce back relatively quickly. But it may take years before jobs in the manufacturing sector return to pre-crisis levels.

Canada lost nearly two million jobs in April, according to a gloomy Statistics Canada report released Friday. Manitoba wasn’t spared. The province lost 64,200 jobs last month, more than half of which were full time. The private sector was the hardest hit as jobs fell 12.9 per cent; public sector employment declined 1.9 per cent. The proportion of job losses in Manitoba last month were around the middle of the pack compared with other provinces.

The unemployment rate would have been much higher if those wanting to work, but who gave up trying (because they were temporarily laid off or couldn’t find work due to the pandemic) were included in the figures, according to StatsCan. Only those working or seeking employment are counted as part of the official labour force. In Manitoba, 34,300 people dropped out of the labour force last month – an unprecedented decline for a single month.

Nationally, the number of job losses since February has already eclipsed the proportion of jobs lost during the past three major economic downturns, going back to the recession of 1981-82.

As the economy starts to re-open, the question now is: how many of those jobs will return and how long will it take for them to come back?

Service-based jobs – including those in retail and the hospitality industry – returned to pre-recession levels in an average of four months after the last three recessions, according to StatsCan. But it took far longer for jobs in goods-producing sectors. It took an average of more than six years for those jobs to return to pre-recession levels in the downturns of 1981-82 and 1990-92. It took even longer, 10 years, after the global recession of 2008-09.

It underscores the need for governments to help keep as many businesses afloat as possible. This isn’t a traditional economic downturn where broad government stimulus can help some businesses survive as they struggle with falling revenues. In many cases, businesses that have been shuttered during the COVID-19 pandemic have no revenue at all, or so little they can’t retain any staff. Many are unable to pay their fixed costs, such as rent and utilities. Even those in the service industry, which have typically rebounded faster, may have more difficulty making a comeback this time. If they can’t survive total or partial shutdown, they may not be around to provide the jobs in those sectors.

Government support for business has been spotty. Some federal programs have worked. The 75 per cent wage subsidy has been helpful for many businesses. But the delay in rolling it out has been problematic. Also, many don’t qualify. The federal loan program has helped provide companies with much-needed liquidity. However, many businesses don’t qualify for that, either.

The federal commercial rent program, co-funded by the provinces, has been a disaster. The program is administered through landlords, as opposed to providing commercial renters with direct aid. Many landlords have opted not to participate. Even when they have, many businesses still don’t qualify.

Manitoba’s support to business continues to be underwhelming. The Pallister government is offering a $6,000 forgivable loan to businesses that don’t qualify for federal support. That may help a small number of companies. But it’s not enough to cover one month’s rent for many.

The problem with not supporting businesses with timely financial aid is it could lead to permanent closure for many. That would substantially delay a rebound in the job market.

The Pallister government may be saving money in the short term by not opening its purse strings to adequately support businesses during this rough patch. But the Manitoba economy and the job market will pay a much larger price for that in the long run.

tom.brodbeck@freepress.mb.ca