In late March, the Business Council of BC (BCBC) modelled two different pandemic-caused recession scenarios for the province – one bad; one real bad.
So when the federal government’s jobs and employment numbers (The Labour Market Survey) were released on Friday, most observers expected still more bad news. Instead, BC added 43,300 jobs in May – something of a pleasant, but mild, surprise.
“It's good news, sure. It's not super good news, [but] I think most people were expecting another decline,” says Ken Peacock, chief economist at BCBC.
There’s a lot to unpack, but the first thing to keep in mind is the labour market numbers don’t align with provincial benchmarks; the survey captured jobs numbers just before BC launched into Phase 2 of re-opening the economy, a fact finance minister Carole James was quick to point out.
“These numbers came before the restart had actually begun,” noted James, who pointed to a “long road ahead of recovery.”
But if it doesn’t reflect the re-opening of the economy, where did those 43,300 jobs come from? Peacock has a theory.
“Businesses would have expected some re-opening, so [for example], if you're a restaurant you've got to get your inventory back up,” says Peacock. “They probably were rehiring some employees just to reopen, in anticipation of that. That to me would be one of the more likely explanations.”
In other words, many businesses were gearing up behind the scenes, preparing for Phase 2.
The May jobs numbers aren’t as bad as many feared – but make no mistake, they are still fairly grim. As Peacock points out, context is important.
“We lost 400,000 jobs in the two months before. When you shut down a sector, or [several sectors], and then reopen them, you’re going to get a bounce.”
Some of the numbers are confusing – for instance, how do jobs increase while the unemployment rate also goes up?
“This often happens with the labour force survey, but it was quite significant this time. And the reason the unemployment rate went up is because, in line with the reopening, people were starting to look for a job,” says Peacock.
“The number of people that did that and transitioned back into the workforce was significant enough that we saw the unemployment rate jump a couple more percentage points – now at 13.4% in British Columbia.”
The big question is the most unanswerable: predicting the future. It’s an oversimplification, but the two scenarios Peacock and Jock Finlayson laid out last month for BC’s recession represented contractions of 7% (bad), and 12% (real bad), respectively.
With a month of data – and the latest job numbers – is the road ahead coming into any sharper focus?
Prior to the numbers coming out, Peacock had been working on an economic update and industry-by-industry analysis. The data was already pointing towards “bad” more than “real bad.”
“I'd already settled on our baseline, more optimistic, but still devastating, scenario,” says Peacock. “The numbers here don’t really change that forecast much.”
One trend the labour market survey makes plain is that the pandemic has been particularly hard on young workers. With a 29% unemployment rate, BC is already in historic territory; even the 1982 recession saw youth unemployment top out at 25%. As Peacock points out, that’s cause for significant concern.
“If you look at the most recent financial crisis and recession, the unemployment rate for that group jumped, and they didn't regain their pre-recession employment level for about six years,” says Peacock. Other cohorts returned to pre-recession levels in 12 to 18 months.
“The longer you're out of the job market, finances become more challenging. Skills atrophy, attachment to the labor market deteriorates and erodes.”
It’s a double whammy for younger workers in that it’s not just seniority hurting them, but the industries that disproportionately employ them have been the hardest hit – tourism, services, and hospitality.
“It’s one thing I would flag as a concern, and I'll be watching closely in the coming months.”
Maclean Kay is Editor-in-Chief of The Orca
SWIM ON:
- Maclean Kay previously wondered why pollsters gauge support for four parties in BC - when BC overwhelmingly vote for just three.
- The Business Council of BC's Ken Peacock and Jock Finlayson explain their two recession models here.
- Back in November 2018, Ken Peacock sat down with Rick Cluff to talk LNG Canada, and what it meant for the larger provincial economy.
