Nightlife in Canadian cities brightened up significantly in February, following January’s lull induced by the Omicron variant of COVID-19. Statistics Canada reported last week that employment in bars, restaurants and hotels rose 12% in February from the previous month, while employment in information, culture and recreation increased by 9 .9%.
The sharp month-over-month increase suggests that Canadian workers were eager to work and employers were keen to hire them as long as improving pandemic conditions and easing government restrictions allowed, and as long as patrons seemed likely to turn up for meals, drinks, and entertainment. .
The revival of nightlife has coincided with a broader recovery in the Canadian industry, according to StatCan’s Labor Force Survey in February. Employment increased across all regions and industries and for all demographic groups, such that the number of employed persons increased by 337,000, or 1.8%, month over month.
The unemployment rate fell by a full percentage point, to 5.5% – for the first time, falling below the pre-pandemic level of 5.7% set in February 2020.
While this makes it look like the COVID-19 recession is over, it’s worth remembering that employment numbers go up and down depending on the state of the pandemic. A dangerous new variant of the virus or a troubling outbreak could push consumers further into isolation and close bars, restaurants and entertainment venues, potentially hurting jobs and businesses.
For now, however, the need to revive the industry and get Canadians back to work has been addressed. That would leave inflation as the most pressing issue for Canada’s finance ministers and central bankers to address.
The Labor Force Survey found that average hourly wages in February rose 3.1% from rates a year earlier. As consumer prices rose 5.1% over the same period, this meant that Canadian families had lost ground and had to stretch their finances a bit more.
Finance Minister Chrystia Freeland, who shoveled cash to families and employers during two years of the pandemic, must now shift gears and go into post-pandemic mode.
This cannot continue indefinitely. Employed persons will eventually insist that their remuneration increases in line with the prices they pay for goods and services. Rising wage levels could, in turn, force companies to raise prices, sending Canada into a wage/price spiral that may be difficult to stem.
Finance Minister Chrystia Freeland, who shoveled cash to families and employers during two years of the pandemic, must now shift gears and go into post-pandemic mode. She said at the end of January that employment and economic growth should be the basis of the budget she is due to present this spring. The February jobs report, however, suggests she may need to think again.
In the current environment, where unemployment is exceptionally low and price increases exceed wage increases, an expansionary budget can do more harm than good. The Bank of Canada began raising interest rates two weeks ago and warned that persistently high inflation increases the risk that long-term inflation expectations could drift higher. Government spending plans will need to take this same risk into account.
Expansionary budgets are more fun to write, but Ms Freeland won’t be thanked if she continues to splash the cash and send the country into a feverish spiral of price increases – with the recessionary hangover that normally follows .