Canadian employment plummets in January with Omicron spread

Home WorkforceCanadian employment plummets in January with Omicron spread

Canadian employment plummeted in January and work absences due to illness soared to record levels as the Omicron variant drove a steep uptick in COVID-19 infections.

By Matt Lundy* – Feb 2022

Canadian employment plummeted in January and work absences due to illness soared to record levels as the Omicron variant drove a steep uptick in COVID-19 infections.

The country lost 200,000 jobs last month, the first decline in employment since May, Statistics Canada said Friday. The unemployment rate rose to 6.5 per cent from 6 per cent. The job losses were worse than expected: The median estimate by financial analysts was a decline of 110,000 positions.

The effects went well beyond layoffs. Total hours worked across the economy fell 2.2 per cent in January. And during the week of Jan. 9 to 15, roughly 1.6 million people were employed but worked less than half their usual hours, an increase of 620,000 from December.

Women standing in an office alone wondering where the employees are.

One in 10 employees were absent from work for all or part of that week due to illness or disability – a record portion and about one-third higher than a typical January.

For the Canadian economy, the January labour report imparted a sense of déjà vu. Job losses were highly concentrated in Ontario (146,000) and Quebec (63,000) after those provinces enacted tighter health measures. And once again, it was close-contact service industries that bore the brunt of layoffs: More than half of the month’s job losses were in hospitality.

But if past COVID-19 waves are any indication, employment should snap back quickly as Omicron fades and restrictions are loosened. That process is already under way. On Monday, Ontario allowed several of its battered service industries – such as gyms and indoor dining – to reopen at a reduced capacity. Quebec is also gradually opening up.

An RBC Insurance study shows mental health-related disability claims have been on the rise across all age groups and are now the most common long-term disability claim in the country. Such challenges are especially acute among younger workers, with nearly half of all new group long-term disability claims among those aged 18 to 35 related to mental health.

“We expect a big bounce back when the February data are released next month,” James Orlando, senior economist at Toronto-Dominion Bank, wrote in a note to clients. “Canadian businesses and workers have been incredibly resilient through all the stops and starts over the last two years. This wave should be no exception.”

The situation was much different in the U.S., which saw employment jump by 467,000 last month, much higher than expected. The U.S. has enacted few restrictions in response to its Omicron wave, and despite the threat of infection, hospitality was the top industry for hiring.

To date, the U.S. has recouped 87 per cent of its pandemic job losses, while Canadian employment has been at or above pre-pandemic levels since October.

Despite the domestic setback in January, analysts said it was unlikely to alter the thinking at the Bank of Canada, which is poised to raise its key interest rate from 0.25 per cent in March.

“With the Bank of Canada on a mission to head off further inflationary pressures, central bankers are still on track to hike rates in March,” Royce Mendes, head of macro strategy at Desjardins Securities, said in a research note.

Before the Omicron wave, the labour market was on a hot streak. Around 880,000 jobs were created in 2021, a record annual gain after a rough 2020, and labour participation rates had fully recovered in most age brackets. If anything, the trouble was finding enough workers. Job vacancies soared to record levels, and while they’ve eased of late, they remain elevated.

Given those challenges, it’s likely that many employers will bring back workers in short order. Statscan noted the number of people on temporary layoff or scheduled to start a job in the near future rose by 120,000 in January, an increase of 131 per cent from December.

The month wasn’t bleak in all industries. The goods-producing sector saw employment rise 23,000 in January, thanks largely to a hefty contribution from the construction industry.

More than four in 10 people worked mostly from home between Jan. 9 and 15. Nearly one-third of people who don’t usually work any of their hours at home did so for at least part of the week. It’s probable that some people tested positive for COVID-19 but were asymptomatic and continued to work from home in January.

The shift to remote work has been substantial. Statscan noted that about one quarter of people work exclusively from home now. By comparison, the 2016 census reported that only 7.5 per cent of workers usually worked at home.

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About the Author’s

Matt Lundy is an economics reporter for The Globe and Mail’s Report on Business section.

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