Canada has never seen anything like this before. In just a few days, companies across the country – from multibillion-dollar stalwarts to family-run restaurants – have cut their operations to the bone, laying off scores of employees. Sometimes it’s a few workers. Other times it’s everyone. Either way, an unprecedented number of Canadian workers are left to navigate government programs –some created just days ago – that will hopefully provide enough cash to cover expenses as the COVID-19 pandemic ravages the country’s labour market.

For many Canadians, job losses during the last financial crisis are still fresh in mind. Only this situation is substantially worse. Already, the federal government received about 929,000 applications for employment insurance benefits since the week of March 16. This represents approximately 5% of the labour force. The speed and extent of the jump in jobless claims is unprecedented; the previous record for an entire month was 499,200 in 1957, according to Statistics Canada data.

The sudden rise in layoffs suggests that even after unveiling plans to inject hundreds of billions in direct aid and liquidity into the economy, Trudeau and other policy makers will need to do more. Another interest rate cut by the Bank of Canada and a bailout of the airline industry and energy sector could materialize in coming days.

The services side of the economy – where eight out of 10 Canadians work – has been directly hit, affecting retail salespeople, hotel and casino workers, as well as restaurant staff, many of whom work in low-wage jobs with little financial cushion. Layoffs are also mounting on the goods-producing side too, in the auto and energy sectors.

According to Wayne Lewchuk, economics and labour studies professor at McMaster University, the federal government’s 10% wage subsidy is not enough for employers to maintain headcount. He’s concerned people with no financial means will have trouble accessing benefits, particularly those who don’t have computers to apply. “Exactly how people are going to access some of these benefits, particularly at the bottom of income scale, is worrisome.”

Four sectors are most at risk and first to be hit, said Armine Yalnizyan, economist and Atkinson fellow on the future of workers: retail trade, educational services (which includes childcare and camps), information and recreational services and accommodation and food services, amounting to more than six million people. 

Several million are self-employed, with little cushion for economic hardship, she said, suggesting the need for immediate measures such as emergency welfare services, increased capacity at food banks and leniency on rent payments.

Casual and temp workers overwhelmingly work on the services side of the economy and will be disproportionately affected, said RBC senior economist Andrew Agopsowicz. 

In the United States, Canada’s largest trading partner, Goldman Sachs projects growth will plummet at a 24% annualized rate in the second quarter, or substantially worse than anything the U.S. has seen “in the history of modern GDP statistics,” the bank’s economists wrote in a note.

In Canada, a recession “is now unavoidable,” said Jean-François Perrault, chief economist at the Bank of Nova Scotia said in a note. Business owners say they need immediate measures to help shelter them through the storm. 

Demand has buckled – but it’s also shifting by the day. Some areas are adding workers. Telehealth services are booming; health-care workers are coming out of retirement; federal funds are flowing to ramp up medical-equipment supplies, grocery and drug stores are hiring and Amazon is adding scores of warehouse workers.

What’s different about this crisis is that thousands of successful companies, with viable business models, are seeing their revenue decimated overnight. Inevitably, that raises concern of how those companies will keep the lights on when bills come due.

But creditors may be more lenient than some assume, said David Ullmann, partner at Toronto-based Blaney McMurtry who has handled some high-stakes cases such as representing landlords during Target Canada’s insolvency proceedings. Mr. Ullmann said banks and landlords would rather come to a peaceful resolution with debtors – perhaps allowing deferred payments or partial loan forgiveness – than see good businesses fail. “A landlord doesn’t want to close a restaurant and go look for another tenant right now,” he said.

If necessary, however, companies can file an insolvency proposal, buying them several months of creditor protection as the pandemic situation plays out. “The system actually works really well for healthy businesses that can survive a period of disruption, and then go forward to where they were before,” Mr. Ullmann said. But if the pandemic drags on long enough, he cautioned, creditors may lose patience. 

In Vancouver, Landsea Tours & Adventures has gone from 130 employees, to four currently and by next week, “probably zero to one,” said Kevin Pearce, president and owner. The company has been in operation for 35 years. “We have survived a few global economic events, epidemics and tragedies. This is truly unprecedented times, and the effect on the [tourism] industry in B.C. is frankly catastrophic.”

Source: Globe & Mail
Source: The Star
Source: Financial Post
Source: Financial Post