(Bloomberg) — With new restrictions and Brexit threatening to push the U.K. back into recession, the economy is probably more than a year away from recouping the staggering losses inflicted by the coronavirus.In broad terms, no sector has escaped the carnage. Economic output is still almost 10% below pre-pandemic levels, 800,000 fewer employees are on payrolls and the government is borrowing on a scale not seen in peacetime in a bid to avert mass unemployment and keep struggling businesses afloat.Beneath the surface, however, sharply diverging fortunes can be perceived. The housing market is enjoying its best run for years, buoyed by government stimulus and pent-up demand. Retail sales are at an all-time high. Job cuts, meanwhile, have fallen hardest on young people seeking a foothold in the labor market.On day 12 of a new lockdown in England to tackle a resurgent Covid-19 outbreak, the following charts provide an overview of the Group of Seven’s hardest-hit economy, eight months after the crisis struck.
The Bank of England had no idea of what lay in store when it delivered its normal forecasting round in January. Brexit presented the biggest threat, policy makers said, as they predicted growth of around 1.5% a year and unemployment remaining below 4%.
As of the third quarter, the economy was over 10% smaller than predicted back then, and officials now don’t expect a return to pre-crisis levels until early 2022 — even if Britain and the European Union clinch a Brexit trade deal. Unemployment stood at 4.8%, the most in four years, after an unprecedented 314,000 redundancies.
On Nov. 5, Chancellor Rishi Sunak announced that furloughed workers will get 80% wage support through March. That may help limit the peak in joblessness to around 7.5%, according to Dan Hanson of Bloomberg Economics.
If any businesses are having a good pandemic, they are couriers, estate agents and some retailers, according to Office for National Statistics data last week.
The real-estate market reopened over the summer, releasing a wave of demand that was further fueled when Sunak announced a temporary tax cut for property buyers. Spending on gardens and house improvements has sustained Britons forced to spend more time at home. The strength of demand for postal services is unsurprising given the shift toward online purchases.
Their fortunes stand in stark contrast to hospitality, leisure and the performing arts. Hardest hit are travel agents, tour operators and air transport services, where output has plunged by over 80% since the end of 2019. Divergences are narrower in manufacturing, which has experienced fewer disruptions to day-to-day operations.
Just as they did in the global financial crisis, young people are bearing the brunt of the pandemic.
About a fifth of 18 to 24-year-olds who were furloughed have now lost their jobs, and only a third of those let go have been able to find new work, according to the Resolution Foundation. Youth unemployment jumped to 13.6% in the third quarter, almost triple the national average.
The figures pile pressure on Prime Minister Boris Johnson to do more to create jobs and retrain unemployed workers.
Even before the crisis, young people were struggling with unaffordable housing, job insecurity and years of wage stagnation. Now they potentially face further damage to their long-term prospects through the effects of scarring on earnings and employment.
The pandemic has wrought havoc with the public finances, pushing debt above 100% of GDP for the first time since Harold Macmillan was prime minister in the early 1960s.
The budget deficit, which was forecast to be just 55 billion pounds ($72 billion) in the current fiscal year, is now on course to exceed 400 billion pounds. As a share of the economy, that’s double the level reached after the financial crisis.
The scale of the damage will be laid bare on Nov. 25, when the Office for Budget Responsibility is due to publish new forecasts. Tax increases in the coming years appear inevitable but there is no immediate pressure on Sunak, with the International Monetary Fund arguing further stimulus may even be necessary.
Financial markets are sanguine too. With the Bank of England mopping up every pound of borrowed money through its bond-buying program, the cost of taking on debt has never been cheaper.
The challenge facing Sunak is vividly highlighted by the fact that Britain’s recovery trails far behind the world’s major industrialized nations, despite a record rebound in the third quarter.
Output was still 9.7% below end-2019 levels, leaving Britain closer to euro-area laggard Spain than its Group of Seven peers, where the average shortfall was little more than 4%. On Monday, Japan reported stronger-than-forecast 5% growth for the quarter, or an annualized 21.4%.
U.K. business investment has stagnated since the 2016 Brexit referendum, and in the third quarter it recovered less than 25% of what it lost in the previous three months. The reticence of companies to spend reflects both the pandemic and concerns about Britain’s imminent exit from the EU single market — potentially with no trade deal.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
