While it’s too early to declare victory against COVID-19, the economic downturn that came along with aggressive containment measures in a large number of developed countries appears to have bottomed.
Canada emerging from the depths
Canada also turned the corner in May as the number of new infections slowed and parts of the economy reopened. Losses in output in March and April were unprecedented and created a large chasm which is unlikely to be filled even as the economy grows in the second half of the year. Like the US, we expect Canada’s GDP will end the year more than 5% lower than in late 2019.
Canada’s labour market improved in May with employment rising by 290,000, a positive step but only amounting to 10% of the jobs lost in March and April. As Canadians re-entered the labour force, the unemployment rate rose to a record high. Consumer spending, home resales and measures of business sentiment also improved in May albeit from unprecedented lows. While the May data was encouraging, the recovery will remain slow and depend on continued progress on curbing the rate of infections.