MONTREAL ― Even if the COVID-19 outbreak ends quickly, life in Canada ― or elsewhere ― won’t be going back to the way it was anytime soon.
That’s the general prognosis coming from the economic experts these days ― experts who themselves admit they can’t forecast very well right now, because the world’s direction today depends not on economic trends, but on the behaviour of a new and still poorly-understood virus.
But some things are starting to come into focus, and it’s becoming possible to envision what the world will look like in three months’ time, as Canada ― hopefully ― emerges from the lockdown.
Here’s the bad, the good and the ugly of what may be ahead.
The bad
First of all, many Canadians will be idle, at least for a while. According to a new forecast from the Parliamentary Budget Office, 5.4 million people will be drawing the new $2,000-a-month Canada Emergency Response Benefit (CERB) in the coming months. That’s more than a quarter of the country’s labour force as of February of this year.
The jobless rate itself probably won’t rise quite that high, because many people are leaving the workforce. Some 600,000 Canadians gave up looking for work in the past month, disappearing from the unemployment statistics.
Watch: Canada’s emergency response benefit still unclear for students, gig workers. Story continues below.
Even after the lockdown, elderly and other vulnerable people will likely be asked to stay home longer than the rest of the population, CIBC economists Benjamin Tal and Taylor Rochwerg predicted in a report released Thursday.
And those Canadians who are working, will be working differently. Many more will be working from home permanently as businesses could be ordered to minimize the number of people in offices, and to keep physical distancing measures in place.
Factories and construction sites will operate below capacity in order to minimize human interaction, meaning goods and buildings will be produced more slowly. The pace of construction may be half what it used to be, Tal and Rochwerg estimated.
People will be doing far less flying, and in order to maintain physical distancing, passengers will finally get some real leg room, even in coach class.
The restaurant and bar industries may face some of the toughest times of all. The CIBC report notes 53 per cent of Canada’s restaurants have closed, and how many will reopen is an open question.
To the dismay of many, large gatherings of people like major-league sports events, conferences and concerts will likely remain shut down for the foreseeable future, the CIBC report predicted. It may be quite a while before anyone enjoys an NHL game in person.
The good
But for those people whose jobs have suddenly turned out to be essential ― the grocery store clerks, the garbage collectors, the delivery people ― things might actually be better than average these days. “Hiring and wage inflation in that space will rise,” Tal and Rochwerg wrote.
And people will be finding work ― maybe at a faster pace than is normal when an economy recovers from a shock.
“For many, in fact for the majority of the newly unemployed, the situation is temporary in nature,” CIBC’s Tal wrote in an email to HuffPost Canada. “The demand for those jobs did not vanish as is the case in a normal recession. It’s frozen. The crisis has an end game.”
That “end game” is the development of a vaccine or treatment that would effectively end the virus’ ability to spread through the human population.
“It’s just a question of time, and that’s why government help here is so important as we simply buy time until it is over,” Tal added.
The World Health Organization has suggested that we are 18 months away from a COVID-19 vaccine, though any timeline for a scientific discovery like this is little more than a guess. However, the effort to find a cure appears to be unprecedented in scale, with hundreds of millions of dollars funding dozens of projects to find a vaccine or treatment.
The ugly
There is one large issue headed Canadians’ way that could seriously complicate a recovery: High household debt levels, which might not be sustainable with so many households losing their income. Canadians were carrying some of the highest debt levels of consumers anywhere when the economic collapse hit.
“Consumer debt levels were elevated heading into the shock,” Royal Bank of Canada chief economist Craig Wright said in a podcast Thursday. “Consumers are shell shocked because of the hit to employment.”
Consumer spending makes up about 60 per cent of Canada’s economy, and in typical recessions, it has helped pull the economy out of its slump. This time, “consumers are not well positioned to lead us out of the recovery,” Wright said.
Policymakers are aware of the problem, and are taking steps. The Bank of Canada and Canada Mortgage and Housing Corp. have embarked on a campaign to buy lenders’ mortgages, a move that will shore up the banking system with a $150-billion (or more) cash infusion.
“The demand for those jobs did not vanish as is the case in a normal recession. It’s frozen. The crisis has an end game.”
- Benjamin Tal, CIBC Economics
All of the major banks have announced mortgage deferral programs, giving households affected by the crisis more time to make payments. However, interest charges still apply, and deferring a mortgage may affect the borrower’s credit rating.
At the same time, banks have announced they are lowering their credit card rates for consumers in trouble, with Vancity credit union in British Columbia going so far as to lower it to zero.
And with one in 10 Canadian mortgages already in the deferral process, there’s a good chance the new world will look different in yet one more respect: Stung by the realization of how fragile our finances are, the days of excessive borrowing may finally be over for Canadian consumers.
But when it comes to predicting the state of our world, the usual experts admit they may be outgunned this time.
“We’re not epidemiologists,” Wright said.