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It’s day 129 since Canada’s 100th coronavirus case. The number of cases is 109,516 as of publication time, up 252 since yesterday—a 10 per cent increase from the seven-day prior average of 230 new cases. At its peak on May 3, the seven-day average was 1,603 new cases a day.
On Thursday, the U.S. reported 77,255 new COVID-19 cases, beating its previous one-day record by nearly 10,000.
And now the details: The federal government is reforming the $83.6-billion Canada Emergency Wage Subsidy (CEWS), Finance Minister Bill Morneau announced Friday. Companies will now be eligible for the salary assistance to pay their employees if they’ve seen any reduction in revenues, with the amount dropping in proportion to their income declines, and over time. The changes are backdated to the beginning of the current claim period, which began July 5, and the program will remain in place until December 19. “This will give confidence to people to apply for the wage subsidy, because it’ll be there for longer, and they know that it will support them to rehire their employees,” Morneau told reporters.
The program previously paid firms whose revenues had dropped at least 30 per cent during the pandemic up to $847 per week per worker. That threshold proved unpopular with innovation-economy executives, who said it disqualified high-growth firms and those with software-as-a-service or other non-traditional business models. More recently, business associations have argued it incentivizes reopening companies to stop growing when they reach the cutoff so they can keep receiving the subsidy.
Friday’s update—which is subject to legislative approval—eliminates that strict floor. Firms that have lost less than half their revenue will initially receive 1.2 times that reduction as a base payment, with the proportion gradually decreasing over the course of the year. That’s capped at $677 per week for the next two months, less than the previous $847 maximum.
Companies whose sales have dropped more than 50 per cent will receive an additional top-up, increasing the subsidy to as much as 85 per cent of a $1,129 weekly salary. The changes raise the maximum payout to $960 a week for the next two months. Finance Canada’s full backgrounder on the update, which details all the revenue drop and claim period permutations and combinations, is available here.
Companies will still be calculating the reduction against the corresponding month in 2019, or an average of January and February this year, another sticking point for high-growth firms. Last month, the Council of Canadian Innovators called for Ottawa to allow businesses to use alternate measures of income—such as billable hours, net new subscribers, gross bookings or units shipped—instead of revenues, to account for tech business models.
Morneau didn’t directly answer a question from The Logic on Thursday about whether Ottawa was considering such a change. “There are always going to be things that we need to look at in these programs to make sure they’re working,” he said. “We’ve tried to come up with an approach that’s going to work for the overwhelming majority of businesses.”
Benjamin Bergen, CCI’s executive director, welcomed the program timeline extension, but said “keeping the requirement to show a revenue decline instead of a reduction of business activities” meant “56% of the tech sector will continue to be ineligible.”
Finance Canada upped the projected cost of the program from $45 billion to $82.3 billion in last week’s economic and fiscal update, citing the upcoming changes. On Friday, the department increased it again slightly.
Business lobby groups recommended a prorated model for the CEWS extension similar to the one the government is proposing during June consultations, and they welcomed the changes. “As businesses re-open, their revenues will slowly grow but they will still need support to build on this momentum,” said Trevin Stratton, chief economist and vice-president of policy at the Canadian Chamber of Commerce, praising the expanded eligibility criteria and new top-up.
Ottawa has so far paid out $20.38 billion to 262,200 employers, subsidizing as many as 2.9 million workers in the process. Last week, Finance Canada predicted more large firms would soon apply to the program. “The wage subsidy will be, we think, a very important part in [the] safe restart of our economy [and] getting people back to work,” Morneau said Friday.
In the markets: The TSX fared better than the major U.S. indices Friday, bolstered by energy stocks and a Statistics Canada report showing wholesale trade jumped 5.7 per cent in May from April, the largest increase in nearly 17 years. The Canadian dollar was effectively flat, falling 0.01 per cent to 73.61 cents U.S. in late afternoon trading.
BlackRock, the world’s largest asset manager, gained US$100 billion in new client funds and reported a 21 per cent increase in quarterly profit. Executives at the largest U.S. banks warned of a sharp dropoff after JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup reported combined second-quarter trading revenue of US$33.4 billion, their best in 10 years. JPMorgan Chase CEO Jamie Dimon said that haul could fall by half for the rest of 2020.
Investors are waiting on news from the summit of 27 European leaders, who are trying to hash out the details of a €750-billion recovery fund. There are sharp disagreements about how to allocate the money, with Netherlands Prime Minister Mark Rutte saying he was “not optimistic,” ahead of the two-day meetings.
“Unless we act now, we should be prepared for a series of human tragedies, more brutal and more destructive than any of the direct impacts of the virus itself”: A United Nations official urged the world’s wealthiest nations to offer money, leadership and “some fresh thinking” to curb decades of potential tragedies after the pandemic.
Bay Street to Main Street: BMO has released a real-time economic index designed to measure GDP fluctuations during the pandemic faster than official metrics are released. BMO’s index looks at hours worked, unemployment rate, home sales, housing starts, business credit, wholesale trade, retail sales, manufacturing shipments, small business sentiment and the TSX stock price index.
The bank is also relying on internal data, like on retail mobility and internal credit-card transactions, to estimate retail sales data ahead of official releases. The Logic has been using publicly available real-time data on factors like traffic and transit usage to closely monitor the economy’s recovery, including this June report.
Initial data from BMO’s business activity index show that “business activity looks to have retraced about half of its contraction by June, a good start, but the second half of the year will be a much tougher grind,” according to the bank.
- Ottawa is holding discussions with Lloyd’s of London on purchasing black-swan insurance.
- Cineplex is cutting 130 jobs and said it won’t yet reopen theatres in Ontario.
- Toronto-based virtual-care startup mednow.ca raised $6.5 million in a round led by Gravitas Securities.
In the lab: A day after Canada, the U.S. and the U.K. accused Russian hackers of trying to take vaccine research, Russia announced it had secured a deal with AstraZeneca to manufacture a vaccine the firm is developing with Oxford University. “There’s nothing that needs to be stolen,” Kirill Dmitriev, who is coordinating Russia’s vaccine efforts, told Reuters. “It’s all going to be given to Russia.” Meanwhile, the European Union is in discussions with Moderna, Sanofi and Johnson & Johnson and biotech firms BioNtech and CureVac to secure vaccine doses in advance.
Drinking from the firehose:
- BlackRock CEO Larry Fink endorsed mask-wearing as a critical factor in slowing the spread of the disease and helping the economy avoid another shutdown.
- WeWork is reportedly laying off about 250 cleaners in the U.K. as the office-rental company continues to cut costs, despite an increased demand from large firms for flexible office space during the pandemic, according to its chairman.
- Google is banning ads on content that includes misinformation about COVID-19, starting next month.
- Financial regulators in China took control of nine financial institutions, claiming they violated rules and added risk to the financial system at a time when it was already vulnerable from the pandemic.
- The U.S. Federal Reserve plans to extend its emergency loan program to non-profits affected by COVID-19, including universities and charities, which are now eligible for loans between US$250,000 and US$300 million.
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* We’re emphasizing new cases, rather than running totals, because “flattening the curve” is when each day’s new cases are fewer than those of the previous day. The percentage increase is determined based on how today’s cases compare to a rolling seven-day prior average.
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