Thursday, July 09, 2020

Canada unexpectedly adds 290,000 jobs on gradual reopening

Jun 05. 2020
The Bombardier Inc. Global 7500 private jet at the National Business Aviation Association Annual Convention in Henderson, Neva., on Oct. 21, 2019. MUST CREDIT: Bloomberg photo by Bridget Bennett.
The Bombardier Inc. Global 7500 private jet at the National Business Aviation Association Annual Convention in Henderson, Neva., on Oct. 21, 2019. MUST CREDIT: Bloomberg photo by Bridget Bennett.
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By Syndication Washington Post, Bloomberg · Shelly Hagan · BUSINESS, WORLD, US-GLOBAL-MARKETS, CAREER-WORKPLACE, THE-AMERICAS 

Canada's labor market unexpectedly strengthened after two-straight months of record losses as the country gradually reopens from covid-19 related restrictions.

Employment rose by 289,600 in May, Statistics Canada said Friday in Ottawa, surprising economists who had been anticipating more losses last month. The gains were across most industries and provinces, though largely driven by higher employment in Quebec, the province hardest hit by the pandemic.

The numbers echo recent high-frequency data, which had signaled a recovery is underway, with job postings increasing and more Canadians reporting an increase in work at the end of May. They will be a relief to policymakers who had been scrambling to inject hundreds of billions in cash into the economy to keep it afloat. Still, just under 5 million remain without work or substantially reduced hours with the jobless rate at postwar records.

"The surprisingly positive readings on employment paint a more optimistic picture of the early part of the recovery, but there's still a long road back," Royce Mendes, an economist at Canadian Imperial Bank of Commerce, said in a research report. "The increase in May only represents 10% of the covid-19-related job losses and absences that occurred over the prior two months."

The pick up in May follows an unprecedented loss of about 3 million jobs in March and April. More than 2 million employed Canadians continue to experience much lower hours worked than pre-crsisis.

The unemployment rate ticked up to 13.7% in May, from 13% in April, as people returned to the labor force.

Economists in a Bloomberg survey expected a loss of 500,000 jobs, with the unemployment rate rising to 15%.

Canada's currency extended gains on the result, appreciating 0.7% to C$1.3406 against its U.S. counterpart at 9:46 a.m. Toronto time. Yields on two-year government bonds rose 2 basis points to 0.35%.

The better-than-expected report suggests the governments programs to cushion the blow to the labor market are working. By mid-May, 179,000 businesses had applied for the government's 75% wage subsidy program. The pace of applications to Canada's emergency income benefit program has also decelerated in recent weeks, suggesting the worst of the layoffs and job losses is over.

In addition to the employment pick up, Statistics Canada said the number of people who worked less than half their usual hours dropped by 292,000. That means the number of Canadians who have either lost their job or worked substantially fewer hours has fallen to just under 5 million, from about 5.5 million in April. Hours worked rose 6.3% in May from the prior month but were still 23% below February's levels .

The surprise jump reflects the cautious reopening of the economy across provinces. By the time the employment survey was taken from May 10 to May 16, some provinces including British Columbia, Saskatchewan and Quebec allowed some non-essential businesses to reopen.

Quebec accounted for nearly 80% of May's gains, the statistics agency said. In contrast, Ontario -- where the economy remained largely shut until May 19 -- saw more losses.

In the early days of the reopening, employment rebounded more strongly among goods producers, the data show. The goods-producing sector added 165,000 jobs versus 125,000 in services. Lower-wage jobs also rebounded more, particularly in retail trade, accommodation and food services.

Demographically, male employment increased more than twice as fast as that for women, consistent with the more rapid increase in the goods-producing industry. Women were among the earliest victims of the covid-19 related job losses in March and the latest data suggest they are slower to recover as well.

"The kinds of jobs that reopened earlier tend to be more male dominated in employment and also that more women don't know how to get back to work because they don't know what to do with their kids because schools aren't open," said Armine Yalnizyan, a research fellow at the Atkinson Foundation.

Women with at least one child under age 6 showed a slower return to work than women with older children. Statistics Canada said it will continue to monitor labor market outcomes for men and women with children in the months to come.

Youth are still suffering heavily from the covid-19 economic shutdown. While employment recovered by 30,000 for those aged 15-24, the cumulative job losses for this age cohort are still a whopping 843,000 from February to May.

 

Bombardier to cut 2,500 jobs to counter business-jet slump

Bombardier Inc. plans to eliminate 2,500 jobs at its aviation division following a slump in demand for business jets.

Manufacturing operations in Canada will bear the brunt of the cutbacks, to be carried out this year, Bombardier said in a release Friday. Overall, the group employs nearly 60,000.

Bombardier shares slipped 2.1% at 9:58 a.m. to trade at 47.5 Canadian cents. They have fallen more than 75% this year.

Two years of selling assets has left Bombardier particularly exposed to the vagaries of the private-jet market amid a wide-reaching recession. Demand in that market is forecast to drop 30% because to the pandemic, Bombardier said. The Montreal-based company said it would give an update on its outlook Aug. 6.

"Bombardier must adjust its operations and workforce to ensure that it emerges from the current crisis on solid footing," the release said.

Weakening markets are raising the pressure on recently installed Chief Executive Officer Eric Martel as the company exits its operations in commercial planes and rail equipment.

Bombardier burned through $1.6 billion of free cash flow in the first quarter, with as much as half of that coming from slow orders for planes and trains, temporary factory shutdowns and the inability to deliver aircraft amid government travel restrictions.

Bombardier, which got its start building snowmobiles in Quebec in the 1930s, announced the sale of its train unit to Alstom in February in the face of more than $10 billion in debt. The company is seeking to reduce debt to about $4 billion by the end of this year, it said at the time.

The decision to sell its transportation unit to Alstom, valuing the business at $8.2 billion, remains a key underpinning for its financial risk profile amid the uncertainty of coronavirus, which has disrupted operations and contributes to cash burn that may approach $3 billion this year, Bloomberg Intelligence analyst Matthew Geudtner wrote in a note last week.

The company saw its junk bonds rise to their highest levels in about six weeks amid a wider market rebound. Bombardier's bonds have returned 20% this week and are among the top performers in the Bloomberg Barclays high-yield index, which is up about 2%. Bombardier notes are still down 24% this year.

The company's 6% bonds due 2022 dropped 1% this morning to 77.2 cents on the dollar, trimming the gain this week to 16 cents. They yield 18.4%, according to Trace data.

The company said it would likely book a $40 million charge this year to cover costs related to the job cuts.

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