Scotiabank, CIBC: Unemployment to remain elevated, reduce purchasing power

Scotiabank, CIBC: Unemployment to remain elevated, reduce purchasing power

Scotiabank, CIBC: Unemployment to remain elevated, reduce purchasing power

Canadian purchasing power is likely to worsen amid the sustained impact of the COVID-19 pandemic on the labour market, according to the nation’s largest banks.

The Bank of Nova Scotia is predicting the Canadian unemployment rate to reach as high as 16%, along with a 1-million drop in the upcoming edition of the Labour Force Survey, The Financial Post reported.

“To arrive at this figure, the change in the stock of CERB (Canada Emergency Response Benefit) applications of about 1.6 million between LFS reference periods was scaled back to compensate for expanded eligibility, while assuming no material gross job creation to offset the job destruction evidence through claims,” Scotiabank told clients in a note.

Meanwhile, the Canadian Imperial Bank of Commerce is expecting unemployment levels to move down more slowly than the rate south of the border.

CIBC Senior Economist Andrew Grantham said that in the United States, 87% of newly unemployed persons said last month that they are on “temporary lay-off,” versus 60% in Canada.

“That would equate to a smaller rebound in the employment ratio (around 2.5%) if all of those workers came back,” Grantham said. “How far [jobs market] rebounds go, and how fast they occur, will of course be largely dependent on the spread of the virus and whether stricter social distancing measures need to be reintroduced later in the year.”