Canada: Labor market, from bad to much worse – Wells Fargo

The Canadian employment report released on Friday showed a negative change in employment by a record of 1.99 million. According to analysts at Wells Fargo, the data reflects how bad is the economy and they forecast a 25% GDP contraction (q/q) during the second quarter. 

Key Quotes: 

“Canada’s labor market, similar to its U.S. counterpart, has gone from bad in March to much, much worse in April as the effects of the COVID-19 lockdown on the economy have become more apparent.”

“Around three-quarters of the job losses were full-time while around one quarter were part-time. In addition job declines were concentrated in the private sector, where jobs fell 1,874,000, mostly in the service sector. Finally, the jobless rate jumped to 13.0%, just below the peak seen in 1982.”

“Another notable aspect of the report was the decline in total hours worked, an indicator which gives an early (if only approximate) insight into GDP trends. For April, total hours worked slumped 14.9% month-over-month, following a 15.1% decline in March. The level of hours worked in April is some 24% below the Q1 average.”

“Clearly, the Canadian economy is in a deep hole—we forecast a 25% quarter-over-quarter annualized contraction in Q2 GDP, but acknowledge the risk is for an even larger decline.”