By Nichola Saminather and Kelsey Johnson
TORONTO (Reuters) – Chris Timms, who was laid off his job as sous-chef at an Ottawa sports pub in March, has since been receiving government support. While the restaurant has partially reopened, he has not returned, and his efforts to find another job have failed.
With Canada’s pandemic-related unemployment benefits set to wind down at the end of the month, he is worried.
“I have an extra skateboard, so am going to sell that … I may get C$50 for it,” Timms, 35, said in an interview. “It’s really nickel and diming. I’m OK for this month, but come September, I don’t know.”
With unemployment at 10.9% in July, nearly double the February rate, millions of Canadians like Timms may soon find it harder to make ends meet.
The 24-week eligibility period for the extraordinary income support due to the coronavirus-pandemic – C$500 a week to anyone who qualifies – concludes at the end of August.
Canada’s Liberal government has paid out more income during the pandemic than was lost, data shows.
The government had spent some C$54 billion ($40.8 billion) in income support to those left jobless due to the pandemic as of June 30, while the Finance Department pegged labor income losses between mid-March and June 30 at C$44.6 billion.
Mortgage and other loan deferrals introduced during the outbreak have also been winding down. Banks had approved deferrals on about C$200 billion of mortgages, and OK’d 445,000 credit card deferrals as of July 23, according to the latest data from the Canadian Bankers Association.
“At some point, lenders will have to say, we want our money,” said Doug Hoyes, co-founder of personal insolvency firm Hoyes, Michalos & Associates. Coming alongside the end of government assistance programs, “that’s when the pressure is going to come to bear,” he added.
Th savings rate in Canada, among the lowest 10 countries in the Organization of Economic Cooperation and Development prior to the pandemic, more than doubled from a year ago in the first quarter.
“Lots of people had some extra cash because they weren’t spending on things like transport and daycare, but it’s not anywhere enough to make up for lost revenue,” said Hoyes, who expects a spike in insolvencies in the fall.
“People had massive debt before and this only makes it worse,” Hoyes said.
Ottawa is due on Thursday, at 2:30 p.m. ET (1830 GMT), to announce plans to transition individuals still requiring support to a reformed version of its unemployment insurance program.
Employment Minister Carla Qualtrough has assured Canadians there will be no disruption in benefits, and said the updated unemployment insurance program is prepared to field some 4 million applications come September.
Furthermore, the replacement of Canada’s finance minister, Bill Morneau – who chafed at the government’s hundreds of billions of dollars in stimulus spending – with Trudeau ally Chrystia Freeland this week could ensure continued aid.
“With the new finance minister, it sounds as if policy is going to end up leaning toward even more stimulus than many had expected,” said Doug Porter, chief economist at BMO Capital Markets.
($1 = 1.3225 Canadian dollars)
(Reporting By Nichola Saminather and Kelsey Johnson; Editing by Steve Orlofsky)
