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Katherine Judge, economist at CIBC Capital Markets

The theme of the labour market has really been asymmetry since the reopening. About 40% of employment is within industries that are stuck in an L-shaped recovery trajectory. So the impact, of course, is concentrated in industries that are service-oriented, as well as those that are related to natural resources. When you look at the industry breakdown, accommodation and food services employment is down by about 15% since February. Retail’s down by about seven, which is the same for mining, oil and gas. So that compares to about 4% for total employment. So we really are seeing this dichotomy in the labour market, where there are some industries that need to operate with social distancing in place until there’s a vaccine available. Whereas in others, we’re seeing more of an adaptation of wearing PPE and being able to function without going back into the scale of lockdown that we saw in the spring.

And now, of course, we are seeing second waves of the virus in many provinces in Canada, but we do know that we do not need to have as widespread of a lockdown this time around to contain the virus, most likely. There are examples of countries abroad that have contained it with just localized lockdowns, as well as intense contact tracing.

So closures have been a lot more targeted this time around because businesses and consumers have adapted to operating with PPE and social distancing. So we are not expecting to see a negative impact around anything like we saw in the spring months. Now, the pace of job gains overall is expected to be very choppy over the next six months until a vaccine is widely available, which likely won’t be until the latter part of 2021. So job gains certainly will slow, and the ones that we’ve seen in recent months are at stake. But since a lot of industries that were impacted never fully reopened back to normal capacity, there’s simply less in terms of losing activity.

We don’t think it will be until 2022 when we see a full recovery in the labour market. And when you look at the first half of 2021, we’re still expecting unemployment to be at least three percentage points above where we entered into the pandemic. So we’re recovering into this very weak environment, a recessionary recovery, if you will.

It’s actually been smaller companies that have been disproportionately impacted during this recession. So those with about 20 to 99 employees account for only about 30% of pre-pandemic employment, but have accounted for almost 80% of job losses since February. So one important thing to remember is that a lot of the kinds of companies that have been hit hard are smaller ones, which don’t have as much weight, especially in U.S. equity markets. Whereas those that have benefited through, say, online sales, have larger weights amongst other tech giants. That’s something to keep in mind in terms of client portfolios as well.

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