Liberals foresee high unemployment, $343 billion deficit due to COVID-19

Liberals foresee high unemployment, $343 billion deficit due to COVID-19

OTTAWA — Nearly two million Canadian workers could remain unemployed this year, according to forecasts in the federal government’s long-awaited “fiscal snapshot.”

The document released Wednesday details how the Trudeau Liberals see the COVID-19 pandemic dragging down the domestic economy and sending the deficit to a historic $343.2 billion.

The economic and fiscal report lays out the government’s expectation of a slow return to a new normal, with unemployment high and growth low through to at least the end of 2021.

Even though the assessment says the worst of the economic harm from the pandemic is behind the country, the document says a recovery can’t begin in earnest until an effective vaccine or treatment becomes available.

Things could, however, get worse under two scenarios from the Finance Department.

Should prolonged shutdowns stay in place, or restrictions not be fully rolled back, a return to normal activity for households and businesses will be uneven and slower than hoped for, leading to a more pronounced drop in economic output than is already expected.

And should the country be hit with a second wave of the novel coronavirus during the annual flu season, the ensuing lockdowns would cause what the Finance Department described as a “deeper and longer-lasting negative impact on the economy.”

The Liberals have repeatedly promised to spend what was needed to put a financial shield between Canadians and irreparable harm. The cost of that promise is now $231.9 billion in direct spending and a deficit comparable only to those seen in the Second World War.

The federal debt is set to pass $1 trillion, by the Finance Department’s estimates.

Whatever the costs, they’re worth it, Prime Minister Justin Trudeau said in a news conference Wednesday morning, before the snapshot was released.

“As we measure the cost of helping Canadians, we shouldn’t forget that the cost of doing nothing would have been far more,” Trudeau said, insisting this is not the time for belt-tightening or austerity.

The document tries to make that case, saying the $80-billion Canada Emergency Response Benefit, which had paid out $53.5 billion in benefits as of late June, has covered Canadians’ estimated $44.6 billion in lost labour income through the first half of the year.

The $2,000-a-month benefit is estimated to have covered monthly housing, food, phone and internet costs for the bottom and middle thirds of households, according to Finance Department calculations.

Historically low interest rates mean the hundreds of billions in borrowed dollars come with “manageable” costs, Trudeau said, and the alternative would be for individuals and households to load up with debt themselves to cope with months of no or little work.

Goldy Hyder, president of the Business Council of Canada, said the steep cost to the federal treasury, which has covered about $9 out of $10 in emergency governmental aid, underscored how vital it is to get the economy moving again.

Perrin Beatty, president of the Canadian Chamber of Commerce, noted the deficit and the debt-to-GDP ratio of 49.1 per cent “will undermine Canada’s fiscal capacity for decades.” In a statement, he called for a move away from “a subsidy-based crisis response” to efforts that get Canadians back to work.

The snapshot noted a $37.3-billion boost to the federal wage-subsidy program, bringing its budget to $82.3 billion, to account for its extension until the fall. Morneau said details will come soon for businesses interested in the payroll help.

The Canadian Federation of Independent Business called the update a missed chance to help businesses know if they qualify for the subsidy.

“Certainty is a cheap stimulus measure that can help many businesses,” president Dan Kelly said in a release.

The Liberals expect more workers to move onto the wage subsidy and off the CERB as that program winds down.

Those who fall through the COVID-19 financial safety net are expected to be caught by a revived employment insurance system, which has been largely dormant since the CERB replaced it in late March.

Government officials admit there will still need to be policy changes to the EI system to help some self-employed workers qualify, and to capture EI-eligible workers who, due to the pandemic, haven’t been able to work the necessary qualifying hours.

“It’s not easy. We’re in challenging times,” Finance Minister Bill Morneau told reporters. “We’re going to make sure we support people to get through these challenging times because we know that’s the right thing to do.”

For this calendar year, the government expects the unemployment rate to hit 9.8 per cent, dropping to 7.8 per cent next year based on forecasts by 13 private-sector economists.

Although that’s an improvement from the record-high unemployment rate of 13.7 per cent in May for a labour force of just over 19 million, it is still much worse than the record low of 5.5 per cent pre-pandemic.

The Liberals will likely have to lay out a training program for workers in the fall even if the economy improves, said Hassan Yussuff, president of the Canadian Labour Congress.

“Not all workers are going to go back to their jobs,” he said in an interview. “Some of those jobs may not be there for workers at the end of the day.”

Speaking in the House of Commons, Conservative Leader Andrew Scheer said the Liberals failed to provide a plan to stimulate economic and job growth.

“Coming out of the pandemic, every single country on the planet will be desperately competing for the same opportunities and the same investments. So where is the prime minister’s plan to set us apart?”

NDP Leader Jagmeet Singh noted the lack of a plan to help with child care, without which parents — and disproportionately women — won’t be able to return to their jobs.

“Moving forward, we need to put forward real solutions that address the problems that people are faced with,” he said. “We know the Liberal government won’t do it unless we fight and push them to do so.”

And the Bloc Quebecois said the Liberals should have targeted aid at sectors that can expect to suffer the longest, such as aerospace and culture, while targeting multinational corporations and internet giants for taxes to offset some of the spending.

Finance officials write the pandemic may yet “cast a long-term shadow over economic developments” through higher household debt and persistent unemployment. The document said the government will announce new measures as needed to support the recovery.

Sheila Block, a senior economist with the Canadian Centre for Policy Alternatives, said the uncertainty about the course ahead suggested the need to maintain or even increase spending: “Now is not the time for rash spending cuts and a turn to austerity.”

This report by The Canadian Press was first published July 8, 2020.

Jordan Press, The Canadian Press

Coronavirus

Get local stories you won't find anywhere else right to your inbox.
Sign up here

 

Just Posted

Alberta chief medical officer of health Dr. Deena Hinshaw updates media on the Covid-19 situation in Edmonton on Friday March 20, 2020. nbsp;Alberta is reporting it's highest daily number of COVID-19 cases, with 364 new infections. THE CANADIAN PRESS/Jason Franson
Alberta confirmed 323 COVID-19 cases Tuesday

Central zone active cases at 145

The Lacombe Generals celebrate a goal in Game 4 of their five-game series against the Daysland Northstars, Feb. 8, 2020. (File Photo)
Lacombe General, North Central Hockey League cancels upcoming season

Due to COVID-19 concerns, the senior AA league will resume in 2021

Health Minister Tyler Shandro and Dr. Deena Hinshaw, the chief medical officer of health, receive flu shot. Photo via Government of Alberta
COVID-19: One more death in central zone

Ponoka County on province’s watchlist

Many rural municipalities were concerned about a proposed reduction to their industrial revenues, but Alberta’s Municipal Affairs minister has come up with an alternative solution. (Photo contributed)
Province and rural municipalities agree on a plan to support Alberta’s energy industry

Creating new wells or pipelines would result in a three year ‘tax holiday’

East Central Express also offers wedding or event shuttle services and tours of the Rocky Mountains. Photo courtesy of East Central Express.
On-demand bus service will now stop in Lacombe

As the winter months arrive, Rob Duncan expects demand for his bus and taxi services to grow

Conservative member of Parliament Pierre Poilievre speaks during a press conference on Parliament Hill in Ottawa on October 19, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Liberals say Tory effort to set up COVID-19 committee will be a confidence matter

The Tories were originally proposing an ‘anticorruption’ committee

(The Canadian Press)
Alberta-raised Cree actor lands role in Disney’s live-action ‘Peter Pan and Wendy’

Tiger Lily is featured in Disney’s 1953 animated “Peter Pan” film

Natural Resources Minister Seamus O’Regan responds to a question during Question Period in the House of Commons Tuesday February 4, 2020 in Ottawa. The Alberta government is welcoming news that Ottawa has approved an expansion of the Nova Gas Transmission Ltd. gathering system in Alberta — while condemning federal delays that it says cost this summer’s construction season. THE CANADIAN PRESS/Adrian Wyld
Alberta welcomes federal approval of gas pipeline expansion while criticizing delay

Pipeline division owned by Calgary-based TC Energy Corp. will now be required to restore 3,840 hectares of caribou habitat,

This 2020 electron microscope image made available by the National Institute of Allergy and Infectious Diseases shows a Novel Coronavirus SARS-CoV-2 particle isolated from a patient, in a laboratory in Fort Detrick, Md. THE CANADIAN PRESS/AP-NIAID/NIH via AP
At least 49 cases of COVID-19 linked to wedding in Calgary: Alberta Health

McMillan says the city of Calgary has recently seen several outbreaks linked to social gatherings

Alberta Premier Jason Kenny and government house leader Jason Nixon chat before the speech from the throne delivered in Edmonton, Alta., on Tuesday, May 21, 2019. Alberta politicians are to return to the legislature Tuesday with a plan to discuss up to 20 new bills — many of which are focused on the province’s economic recovery. THE CANADIAN PRESS/Jason Franson
Alberta legislature to resume Tuesday; focus to be on economic recovery

Opposition house leader Heather Sweet said the NDP will focus on holding Premier Jason Kenney

A passer-by walks past a COVID-19 testing clinic in Montreal, Friday, Oct. 16, 2020. THE CANADIAN PRESS/Ryan Remiorz
Canada ‘yet to see’ deaths due to recent COVID surge as cases hit 200,000

Much of the increase in case numbers can be attributed to Ontario and Quebec

robbery
UPDATE: Suspect identified in early morning shooting

Rimbey RCMP had responded to a complaint of an armed robbery at the Bluffton City General Store

Executive Director of Agape Kate Halas (left) receives $1000 from Sgt. Eric Christensen (right) on behalf of Agape. Photo/ Shaela Dansereau.
Former Wetaskiwin Peace Officer wins provincial award; gives back to Wetaskiwin community

Eric Christensen has won the Alberta Association of Community Peace Officers Award of Excellence.

Agriculture Minister Devin Dreeshen (Alberta government photo)
Big boost for Alberta college agriculture research

The $2-million agreement to benefit Lethbridge College’s applied research team

Most Read