BUSINESS
11/08/2020 11:03 EST

Long-Term Joblessness Is Canada's Latest Economic Problem

The share of the labour force that has been out of work for more than half a year is now higher than after the financial crisis of 2008-09.

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Canada continues to recover jobs lost during the spring pandemic lockdowns, but not quickly enough to stop a worrisome new trend: Soaring long-term joblessness.

The share of Canadians considered “long-term unemployed” ― meaning out of work and looking for work for 27 weeks or more ― has soared to heights not seen since the lengthy recession of the early 1990s.

It “could eclipse those levels in the months to come,” CIBC economist Royce Mendes wrote in a client note Friday,” noting that the number of long-term unemployed has been rising much faster in this crisis than in previous recessions.

Watch: U.S. still has 10 million fewer jobs than before the pandemic. Story continues below.

 

In all, 448,000 Canadians were long-term jobless last month, Statistics Canada said in a report Friday. The sharp spike reflects “the flow into this category of those who lost jobs in March and April and have been unemployed since then,” the agency said.

Many labour and social experts consider long-term joblessness a serious problem, not only for economic reasons, but because studies have shown it can affect physical and mental health and even schooling outcomes for children of affected parents.

 

Research has found those who experience long-term unemployment have a harder time in the job market going forward ― they are less likely to find work, and earn less than those who haven’t experienced long bouts of unemployment.

There are many reasons offered as to why, including a perception among employers that those who have been out of work for a long time must be “bad apples,” and the fact that people’s skills deteriorate when not in use.

U.S. ‘on cusp of catastrophic long-term unemployment’

South of the border it’s a similar story, with the number of long-term unemployed spiking to 3.6 million in October, from 2.4 million the month before, according to the U.S. Bureau of Labor Statistics.

There the problem could soon be compounded by the fact that many emergency income supports ran out during the summer, and ― in the midst of an acrimonious election cycle ― the Trump White House and Congress didn’t renew the measures.

“I think we’re on the cusp of catastrophic long-term unemployment,” Maria Heidkamp, director of the New Start Career Network at Rutgers University, told NBC News.

“The fact that so many of the layoffs we thought were going to be temporary have turned out to be permanent — we’re just not prepared for that right now.”

A return to normal?

The financial outlook for Canada’s long-term unemployed is somewhat better, as the federal government has extended a number of emergency income supports, and has replaced the Canada Emergency Response Benefit (CERB) with a new Canada Recovery Benefit (CRB) and more generous Employment Insurance payouts.

The one question no one can answer right now is when people can expect the job situation to start returning to normal; that, unfortunately, depends on COVID-19.

“Labour markets are still exceptionally weak,” Royal Bank of Canada senior economist Nathan Janzen wrote in a client note Friday. “The big question remains how much of the already slowing pace of job growth can be sustained given the resurgence in virus cases.”