Why Canada's job market is recovering from COVID-19 faster than the United States

Jessy Bains
·6 min read

Job markets on both sides of the border are still a long way from full recovery from the effects of COVID-19, but Canada is quietly pulling ahead of the U.S. after being neck and neck in June.

“This coincided with a divergence of pandemic trajectories in each country, with new cases dropping in Canada early in the month, while new cases started rising in the U.S. a few weeks later,” Brendon Bernard, economist at job search site Indeed, told Yahoo Finance Canada.

Canada added 952,900 jobs in June as restrictions eased; job growth then tapered to a still better than expected 378,000 in September. That tapering into the fall has been more dramatic in the U.S., with 4.8 million jobs added in June and 661,000 in September. To help put that into perspective, consider the U.S. population is nearly 9 times the size of Canada’s.

Source: TD Economics
(TD Economics)

The U.S. has had more deaths from COVID-19 (220,000) than Canada has had cases (201,000). The U.S. death rate per million is 670, compared to 265 in Canada.

Canada and the U.S. calculate employment rates differently. When Statistics Canada adjusted for U.S. methodology, Canada’s employment rate was 2.7 percentage points lower in September than in February. It was 4.5 percentage points lower in the United States.

Bernard says the difference in COVID-19 case trends might help explain the divergence, but other factors might be at play.

“Some parts of the U.S. that weren’t as hard-hit by the summer wave of COVID-19 cases remain among the furthest from February employment levels,” he said.

The pandemic has made cross-border comparisons even trickier than they already were. Bernard says Canada’s relative strength should be taken with a grain of salt for a number of reasons.

“The statistical treatment of temporary layoffs versus absent workers might vary, which could impact the overall numbers. Moreover, collecting employment data has also been more difficult during the pandemic,” he said.

“The response rate to Canada’s Labour Force Survey is well down from last year, while responses to the U.S. Current Population Survey also fell earlier in the pandemic, but have mostly rebounded since.”

More than virus containment

TD Economics says Canada’s job market was slower out of the gate because of a more cautious approach to reopening, and its recovery isn’t only stronger but more widespread, with 11 out of 15 industries considerably closer to pre-pandemic levels.

“Furthermore, several industries in Canada saw employment move above pre-pandemic levels in September. Utilities, education, and professional, scientific and technical services all recorded full recoveries last month,” said TD economists Beata Caranci and Sri Thanabalasingam in a research note.

“Meanwhile, not one industry in America has been able to achieve this feat so far. However, it is worth mentioning that trade, construction, transportation and warehousing industries have returned employment at a more rapid pace in the U.S. relative to Canada.”

But TD Economics says the outperformance goes beyond better virus containment

“Canada’s job market is backstopped by stronger policies to encourage parents back into the workforce, while also giving Canada a head-start on that position. COVID-19 parental leave programs allow individuals to take unpaid leave for up to 26 weeks, and existing policies like paid vacation have helped keep impacted Canadians engaged with their employer through the pandemic.” said Caranci and Thanabalasingam.

“It appears many parents took advantage of these programs. With most schools and daycares fully reopening in September and a high share pursuing in-class experiences, parents were able to return to work.”

On the other hand, TD Economics notes U.S. employees got up to 12 weeks of paid leave to care for children, but that applied only to employers with fewer than 500 employees. There’s also no U.S. law requiring employers to give parents leave to care for their children.

Political uncertainty

Unlike Canada, the U.S. is in the homestretch of a heated election.

“Canada is beating expectations, and the difference in the last few months could be a testament of increasing uncertainty as the U.S. heads into a potentially very disruptive election season,” said Aleksandar Tomic, program director of Master of Science in applied economics at Boston College.

There has also been a great deal of uncertainty for people in the U.S. who work in STEM sectors because of a ban on the H1-B visa, since partially overturned, that brings in skilled foreign workers.

“It is key to remember that talent is mobile and has choices,” Richard Burke, CEO at employee immigration services provider Envoy Global, told Yahoo Finance Canada.

“Many U.S.-headquartered companies have had to consider expanding offices to more immigration-friendly locations to access the foreign talent they’ve continually relied on to fill the demand for high-skill applicants, as the U.S. education system has been unable produce a large enough domestic supply.”

Burke says ballooning demand for skilled employees in the U.S. can’t be met without immigration, which bodes well for Canada considering its lofty immigration goals.

“Canada has, by comparison, embraced this opportunity to use immigration to address both their population growth goals and the global skills gap with their Global Talent Stream and Global Skills Strategy,” said Burke

“Over the last three years, 75 per cent of Canada’s population growth is attributed to immigration, mostly in the economic category and the plan explicitly sets the goal to welcome 1 million immigrants to Canada between 2019 and 2021.”

Even before the pandemic, Envoy Global data found 51 per cent of U.S.-based employers said they were considering Canada for their company’s expansion, up from 38 per cent in 2019.

The hiring process

Tony Anello, Chief Commercial Officer at recruitment site Modern Hire, says good candidates are getting hired quickly in Canada.

“Modern Hire’s research has found that a low time-to-offer is crucial to reducing turnover and improving business outcomes, as the best candidates are most often hired away most quickly,” Anello told Yahoo Finance Canada.

“This is a very positive sign, and one reason why Canada’s unemployment numbers have improved.”

Anello says Canadian clients were showing more interest in virtual recruitment even before the pandemic.

“Many of our Canadian-based clients at Modern Hire were requesting virtual hiring tools ASAP in March, so they were able to adapt to the changes in remote work and hiring much quicker, leading to quicker time-to-hire and lower unemployment rates,” he said.

“Canadian candidates also tend to be more proficient in the use of technology and web-based recruiting and interviewing tools, which can also help improve time-to-hire rates. We see lower levels of help desk requests and a higher percentage of our hiring assessments being accessed on mobile devices in Canada than elsewhere around the world.”

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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