This article in the Economic Insights series highlights sudden changes in economic conditions as households and businesses were adjusting to social and economic restrictions intended to contain the spread of COVID-19. It is the first in a series of articles that will provide integrated analysis of the economic impacts of COVID-19 as new data and information become available. This first report is based on data that are publicly available as of May 20, 2020.  

Highlights:

  • Total employment fell by three million from February to April 2020 
  • Total hours worked fell by almost 30% over this two-month period
  • Canadian merchandise trade in March fell to the lowest level since January 2018
  • Manufacturing sales in March fell to the lowest level since mid-2016 
  • Sales of auto manufacturers and parts suppliers were both down over 30%
  • Headline consumer inflation fell below 1% in March for the first time since the spring of 2015
  • Sharp declines in energy prices resulted in the largest year-over-year deceleration in the all-items index since September 2006
  • In April, lower energy prices pushed the headline rate into negative territory for the first time since September 2009
  • Flash estimates of gross domestic product, published in mid-April, projected a 9% decline in monthly GDP in March and a 2.6% decline for the first quarter of 2020.

Unprecedented declines in labour market activity during March and April
While total employment declined by 15.7% from February to April, the contraction in labour market activity was more severe in terms of hours lost, as total hours worked fell by 27.7% over this two-month period. Service industries, led by severe declines in accommodation and food, health and social assistance services, wholesale and retail trade, and educational services, shed hours at a faster pace in March, while declines among goods industries accelerated in April, fueled by lower hours in construction and manufacturing. 

Many of the largest employment losses during March and April occurred in service industries with lower average earnings and among jobs that offer less security. Large declines in employment and hours were far less apparent in higher-earning services, such as professional services, financial services and public administration, where employees often have more flexibility to work from home. The loss of disproportionately large numbers of lower-paying jobs had a marked impact on average hourly wages for the economy as a whole, which rose over 10% on a year-over-year basis in April.  

Businesses provided information on workforce adjustments and business resiliency
Statistics Canada, in partnership with the Canadian Chamber of Commerce, conducted a special survey in April in which businesses reported on how COVID-19 has affected their operations. Representatives from more than 12,600 businesses took part in the survey. Nearly two-thirds of businesses indicated that they had been highly affected by lower demand for their products or services, while almost three-quarters reported that they were negatively affected by social distancing measures.  

Businesses also provided information on the scope of their workforce adjustments. Four in ten respondents reported laying-off workers due to COVID-19. Overall, slightly more than one-quarter of respondents reported laying-off 50% or more of their workforce, including 40% of retailers. Nearly 40% of respondents reported reducing staff hours or shifts. 

Declines in merchandise trade as COVID-19 impacts auto manufacturing
The potential impacts of COVID-19 on Canadian trade flows became apparent early in the year. Exports to China declined 9.9% in January while imports from China fell 12.6%.  

February’s trade report highlighted further declines in Canada-China trade, as exports to China fell an additional 5.4% while imports declined 6.9%. Lower imports from China in February reflected declines in computers and peripherals, cellphones, and clothing and accessories. 

By March, declines in Canada-U.S. trade pushed total Canadian merchandise trade to the lowest monthly level since January 2018. Total exports fell 4.7% in March, with lower shipments to the U.S accounting for about 80% of the decline. Similarly, imports were down 3.5%, almost all on account of lower shipments from the U.S..

Total manufacturing sales fell 9.2% to $50.8 billion in March, the lowest level since June 2016, as over three-quarters of manufacturing establishments reported that their activities were impacted by COVID-19. Over one half of the estimated COVID-19 related decline in total manufacturing sales reflected lower sales among makers of transportation equipment. Merchandise trade and manufacturing sales are expected to continue to decline in April due to the impact of the economic shutdowns.

Weekly update – Friday, June 5, 2020
Following losses of more than three million from February to April, employment rose by 290,000 in May as several provinces had begun to ease public health restrictions and allow some non-essential businesses to re-open. Three-quarters of the overall employment increase in May was in full-time work, while nearly 80% of overall gains were accounted for by higher employment in Quebec. About one-half of the overall increase in employment in May was in construction and manufacturing industries, led by gains in Quebec. Following employment losses of 582,000 from February to April, employment in wholesale and retail trade rose by 107,000 in May, with one-half these gains occurring in Quebec.  Ontario was the only province where employment continued to fall in May. Most restrictions on economic activity remained in place in that province during the LFS reference week of May 10th to May 16th.

Source: Stats Canada
Source: Stats Canada