Companies have modest hiring plans, low wage growth expectations, Bank of Canada says
The central bank's business outlook survey finds that wage growth is widely expected to slow over the next year
OTTAWA — Canadian workers and companies expect wage growth to stay low over the coming year over heightened uncertainty from the COVID-19 pandemic, the Bank of Canada says in two new reports.
The central bank’s business outlook survey finds that wage growth is widely expected to slow over the next year, with some firms reporting a wage freeze.
A separate survey on consumer confidence, released along with the business outlook, suggested workers expect their wages to grow over the next year, but at a pace below pre-pandemics levels.
Business hiring intentions remain historically low, even as the overall outlook on employment edges up.
Almost one-third of businesses told the bank they expect their workforce numbers to remain below pre-pandemic levels for at least the next 12 months, or to never fully recover.
About 100 firms took part in the bank’s regular survey released Oct. 19, but did so between late August and mid-September when COVID-19 case counts were still low.
As of September, the country has gained back about 2.3 million of the three million jobs lost in the spring when non-essential businesses were ordered closed to curb the spread of COVID-19.
The survey of consumers showed an uptick in job prospects and landing a new job, as the Bank of Canada found a decline from the second quarter in the reported likelihood of losing a job.
That’s not to say they were ready to quit: The reported likelihood of voluntarily leaving a job remained much weaker than pre-pandemic, despite a small improvement, “suggesting that concerns about the health of the labour market are still elevated.”
“If this results in less turnover, it could lower the quality of job-worker matching, leading to lower future productivity and wage growth,” the report said.
Now, restrictions once rolled back have been imposed anew in some parts of the country over concerns about an acceleration in the number of COVID-19 cases.
As case counts rise, so too do concerns that job gains seen over the last three months may roll back.
The Liberals have extended a key wage subsidy program to next summer, hoping to provide a boost of business confidence and prod hiring. Nearly half of firms surveyed by the Bank of Canada said they used the subsidy to avoid layoffs or quickly refill positions.
The government also eased access to employment insurance benefits, with about 1.5 million applicants applying for the income support since late September.
The parliamentary budget office estimated the EI changes would have a gross cost of $8.6 billion this fiscal year, and $6.5 billion in the ensuing 12-month period. The watchdog’s report on Oct. 19 warned the estimates are subject to a labour market outlook that “is highly uncertain.”
The uncertainty about the economic and health impacts of the pandemic has led to a drop in consumer spending as the central bank reported many consumers report shopping less often, and an increase from the previous quarter of those putting off major purchases.
Savings have increased as a result.
The bank’s survey suggested lower-income households were more likely to keep the extra savings as a safeguard, but only slightly more than other income levels. The majority of households planned to hold on to the extra money as a precaution, or pay down debts.
Few told the bank they planned to spend the extra cash next year or the year after.
“With many expecting the recovery to be protracted, it’s not entirely surprising that the majority of households are planning to be frugal and to hold on to their savings,” TD economists Sri Thanabalasingam and Ksenia Bushmeneva wrote in a note.
“But, as a result, it could be some time before consumer demand fully recovers.”
Younger workers, those between the ages of 18 and 24 whose unemployment rate still remains among the highest for any group, were less optimistic about returning to a normal working schedule than those between 25 and 55.
If the belief turns into fact, the Bank of Canada warned younger workers could face the risk of “longer-lasting economic damage.”
By Jordan Press