Bank of Canada Governor Tiff Macklem indicated he plans to maintain plenty of stimulus in the economy well into a strong labour market recovery.
Mr. Macklem emphasized the damage COVID-19 has caused to certain segments of the job market, especially young people and women, and said the bank needs continued support.
Macklem laid out several labour market reasons why policy needs to remain accommodative for a prolonged period. This includes helping foster the immediate rebound in employment, limit scarring effects of long-termed unemployment and facilitate what appears to be a Covid-driven acceleration in digitalization.
In another dovish comment, Macklem noted how there was little sign of inflation just before the pandemic despite unemployment at 40-year lows at the time.
“As the pandemic recedes and the recovery continues, we will keep that experience in mind,” Macklem said. “Monetary policy can continue to support demand in order to minimize scarring and bring as many people into the workforce as possible.”
Canada’s labour market recovered swiftly in the immediate aftermath of the pandemic but has now begun to reverse course amid winter lockdowns. The nation still has more than 850,000 jobs to recover from pre-pandemic levels.
Youth and women have been disproportionately hit hard from the losses because they often work in the lower-waged jobs that have been most impacted by the lockdowns. The pandemic will also disrupt the labour market through increased automation and digitalization, Macklem said, adding it will be important for all levers of public policy to play a role in facilitating a recovery.
“We all have a role to play to ensure the recovery is broad-based and sustained, with the benefits shared widely,” he said.
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