Normally, an increase in the number of people actively looking for work is viewed as a positive sign. In this case, there could be something else at play—it may signify that many of the job losses were not temporary.
The Canadian economy is coming back on line and appears to have bottomed out–at least for now.
Social distancing measures have been eased; real time and high frequency indicators like traffic levels, public transportation use and restaurant bookings have increased. Canada added 289,600 jobs in the month of May, when economists had expected a decline of 500,000. The unemployment rate increased to 13.7%, but this was due to more people looking for work.
Since the beginning of the year, the Canadian economy has lost nearly 3 million jobs, and the gains in May offset only 10% of the total job losses. We have a long way to go.
Retail and wholesale trade, manufacturing and construction and accommodation, and the food services industries accounted for a large proportion of the gains, which had been some of the hardest-hit sectors.
There was a large increase in the number of people looking for work, which as noted above, increased the unemployment rate significantly. Normally, an increase in the number of people actively looking for work is viewed as a positive sign. In this case, there could be something else at play—it may signify that many of the job losses were not temporary. If this is indeed the case, then we could be in for a longer-than-expected recovery that further emphasizes the need for additional fiscal stimulus measures.
We and other economists, analysts and commentators have suggested that the crisis will hasten digitalization and automation trends. While in the long run this will improve productivity, such acceleration can cause short-term job losses in industries undergoing disruption and transition.
