The waves of catastrophic economic news have been relentless and staggering.
More than $1 trillion wiped from Canadian stocks in a month. A record 500,000 workers applying for employment insurance in a single week. Businesses abruptly shuttered. Airlines suspended. Factories closed. The largest autoworker mass layoff ever. Whole sections of the economy ground to a halt and a global recession all but guaranteed.
Not to mention the $82-billion federal aid package announced Wednesday — the largest government bailout in the country’s history.
“I’ve been doing this for about 40 years and I don’t think I’ve come across anything like this,” said Sheila Block, senior economist at the Canadian Centre for Policy Alternatives. “It’s going to be really big and it’s going to be really bad.”
In the wake of an historically volatile period for the Canadian and global economies, the outlook is undoubtedly bleak. Just how bleak is as uncertain as the course of the coronavirus itself.
“The monitoring of the economy is almost at the same intensity as the monitoring of the COVID-19 cases,” said Larry Smith, an economics professor at the University of Waterloo. “The longer it lasts, of course, the broader the damage becomes.”
The Star spoke with four economists to try to get a sense of what the future holds for the Canadian economy. All of them said we are in uncharted territory and there’s no historical parallel for what’s happening right now.
“It’s hard to contemplate anything like this,” said Pedro Antunes, chief economist for the Conference Board of Canada. But the “demand shock” required by social distancing should be less economically dangerous than the 2008 financial crisis, he said, so the economy should be able to quickly bounce back.
“But it all depends on this very big unknown, which is the virus and our ability to contain it.”
Even before the coronavirus outbreak, Canadian economists and policy-makers were already bracing for the possibility of a fairly deep recession, said Tammy Schirle, an economics professor at Wilfrid Laurier University.
“Now it’s kind of like we’re mixing a public health crisis together with a recession and trying to keep everyone afloat,” she said. “There is clearly no blueprint for how to move forward with this or the best way to do it.”
The short term
You don’t need to be an economist to see that the social distancing measures we’ve implemented are hurting the economy. “Just look at the streets,” Smith said.
But the pain is not distributed equally. Retail, food services, transportation, entertainment, recreation and hospitality are disproportionately affected. Those sectors make up a significant portion of Canada’s GDP — roughly 13 per cent — and they alone can alter the growth of the economy, especially given the massive, sudden losses they’re currently dealing with.
The emergency federal aid package was aimed at quickly helping those workers and businesses most directly affected by COVID-19.
“The very immediate priority is just trying to make sure people have the opportunity to stay home,” Schirle said.
To put the size of Wednesday’s bailout in context, the federal government and the provinces combined spent $54 billion over several years to boost the economy following the 2008 financial crisis. And even though Wednesday’s $82 billion outlay was massive, all of the economists surveyed by the Star considered it only the first step.
The major banks also announced increased flexibility on mortgage and loan payments, all geared toward helping businesses and consumers weather the economic storm.
“So that when we finally get through this and people can start going back to work, there’s jobs to go back to,” Schirle said. “They’re still going to be hit really hard by this. It’s going to take a while to recover, but at least there’s a better chance of doing that.”
Some businesses have complained the aid isn’t enough.
“It may well not be enough,” said Smith. “I say with no political prejudice whatsoever that I believe the government response is prudent in the circumstances. They also plainly said that they will take further measures as necessary.”
The government has to be mindful of the long-term consequences of this kind of spending, Smith said, and the goal should be to take a “meaningful step,” which he believes it did.
“The amount of money on the table is enough to have some economic effect,” he said. “You’re ameliorating the disadvantage. It might well not be enough, but again you have to monitor the situation.”
Schirle said it would be wise for policy-makers to take some time to figure out which businesses are going to need the most assistance and how best to deliver that assistance. “Because that’s sort of a second priority, or possibly a third, although business owners will think of it as first.”
Block was encouraged by how quickly government aid was announced, but she was hoping the government would guarantee everyone the maximum EI payment, given how difficult it will be for some workers to survive on 55 per cent of their insurable wages. “We know that people who are earning minimum wage can barely make it on 100-per-cent of their earnings.”
The long term
The big questions for economists are 1) How long will this last? and 2) What losses are gone for good?
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The longer this goes on, the deeper the strain will be on certain businesses. They may not all survive.
Businesses that can’t stockpile what they sell are in the toughest position. When your favourite pub reopens, you’ll be back, but the money you would have spent in it today is “gone forever,” Smith said. “We can’t bank time as consumers. The amount of entertainment I can consume in my lifetime has now been reduced. That of course exacerbates the long-term effects.”
What if this goes on for two or three or four months? Or longer?
“That’s when I think the stresses will really start to show up,” Antunes said, adding that he’s worried most about the “multiplying effect” of consumers’ uncertainty and lack of confidence in the financial sector.
“This could last three months, six months or there could be more dire scenarios where we see this lasting a fair bit longer, and there I would start to get concerned about what we might consider the long term.”
Block said another long-term effect could be that industries that were already at risk and on the cusp of big changes could see those changes accelerated and might “push some over the edge.”
She cited changes in demand for fossil fuels and also the shift to more online sales in the retail sector as two examples.
Governments should be thinking about how to support workers and regions that rely on those industries that may be forced to transition.
“That’s the longer term project,” she said. “What we know from other countries is this pandemic seems to pass — with terrible loss and death — but once we have kind of stabilized, I think it’s going to be really important for governments to turn their attention to this.”
Businesses big and small are facing an uncertain future, from manufacturing giants like Boeing, which is desperate for government aid to stay afloat; to the independent restaurant in your neighbourhood, which likely gets by on razor-thin margins at the best of times.
Particularly hard hit are airlines, cruise ship companies, sports franchises, hotels and theatres, which have seen billions of dollars in potential revenue vanish almost overnight, along with the oil industry, which was already reeling from tanking prices and could face a bloodbath in the event of a global recession.
Given how heavily Canada relies on the U.S. for cross-border trade, Antunes said the U.S.’s ability to contain the virus will be nearly as important to the Canadian economy as our own efforts.
“If there’s a situation where Canada does well in terms of our health measures, but they’re not doing so well in the U.S., I think that’s a continued risk to our economy. So we do need to see North America do well in terms of containing this.”
Reasons for optimism?
In spite of all the obvious bleakness, the economists surveyed by the Star said there are still reasons to be hopeful.
“We should not underestimate the ability of the economy to bounce back from something like this,” Block said. “We are a very rich province in a very rich country. We have a lot of resources and I absolutely think that the economies will recover. I think what we want to do is minimize the harm done to individuals and families through this process, and we know the greatest harm is likely to those people who are most marginalized and have the least resources.”
Antunes is also confident in the Canadian economy’s ability to recover.
“There’s nothing that bounces back more quickly than consumer spending,” he said. “As long as the incomes are there and the income supports are there, people will hold off on purchases, they’ll hold off on vacations, but sooner or later they’re going to get back out there.”
How an energy jobs coalition can help the US economy bounce back | TheHill – The Hill
The chorus is growing louder: in addition to halting the increases in coronavirus cases, we need an energy stimulus package focused on rebuilding the economy. Job creation and infrastructure development will be key.
With unemployment filings reaching nearly 10 million, it is clear we are in the midst of an economic calamity leading to significant business closures and further job losses, despite the stimulus packages enacted by Congress to date. We need to create new jobs, protect the livelihoods of American people and ensure the future resilience of our economy
In normal times and in crisis, we are completely reliant on energy, water, transportation, communications and finance infrastructures to keep our economy running. Energy has a special place in this critical infrastructure mix. The Department of Homeland Security describes it as the “key enabler of all other infrastructures… Without a stable energy supply, health and welfare are threatened, and the U.S. economy cannot function.”
Within the energy sector, electricity — the “uber” infrastructure on which all others rely — deserves special attention. It is essential for running our hospitals, operating ventilators, charging our phones and computers and communicating via internet-enabled video conferencing — critical for our current makeshift economy.
The energy sector — in the early stages of a low-carbon transition — has seen natural gas, renewables, storage and efficiency play a greatly expanded role over the last decade and is a powerful job creator. The recently-released 2020 U.S. Energy and Employment Report underscores this connection: while the energy and auto sectors make up 5.4 percent of the American workforce, they created 10.7 percent of all new jobs since 2015. Translation: 915,000 new jobs, over 40 percent of them in energy efficiency alone.
This argues for a prominent position for energy in the next stimulus package. The federal efforts during the Depression of the 1930’s and the Great Recession of 2008-2009 are noteworthy in this regard.
During the Depression, the Civilian Conservation Corps, Rural Electrification Administration, Tennessee Valley Authority and Bonneville Power Authority were established to repair and build infrastructure, initiate large scale hydropower for electricity generation and take electricity to every home and farm. Three of these programs were principally energy-related — the REA alone supported the formation of 800 rural electric co-ops and the construction of 350,000 miles of power lines.
The American Recovery and Reinvestment Act also had a significant energy focus. It kickstarted a rapid expansion of on-shore wind, initiated large scale solar deployment, supported the first commercial scale carbon dioxide capture and sequestration facility at a coal plant and laid the foundations for the development of “smart” energy systems — as well as creating a new approach to clean energy innovation, ARPA-E, which has spawned over 80 start-ups.
As the public and private sectors turn their attention to rebuilding our economy, we need to seed new industries that underpin our low-carbon future and build infrastructure aligned with that future. We don’t need a physical “corps” or new federal organization as in the 1930s — our energy systems are largely operated by the private sector and have vast infrastructures in place. But we do need an energy stimulus program built on the foundation of an “Energy Jobs Coalition” (EJC) to keep the focus on energy infrastructure modernization and job creation through 2021 and a platform for further job growth after that.
What programs might be supported by an Energy Jobs Coalition in a new stimulus package?
Clearly, immediate relief for modest income families must remain paramount, for example, by supporting additional low-income energy assistance through the Low Income Home Energy Assistance Program. Grants could also support electricity and gas distribution companies to enhance their energy efficiency programs, especially for low-income households and small businesses.
EJC-supported programs could include capital improvements that substantially increase energy efficiency in public buildings — courthouses, city halls, etc. This is especially important for rural areas where declines in population and high unemployment have reduced tax bases. Federal buildings could be improved through an amped-up Federal Energy Management Program, saving money on utility bills that could be spent elsewhere.
In addition, the EJC should support grid infrastructure modernization. A cost-share program to automate substations, for example, would further enable distributed generation while helping to protect the grid from cyber-attacks. Modern energy systems should be designed to support job growth while remaining aligned with the active clean energy transition.
Programs should support the decarbonization of incumbent energy systems, such as natural gas, by providing cost-share funds to reduce natural gas flaring, produce renewable gas from landfill and agricultural waste. They should also support state grants for offsetting the cost to low-income consumers associated with replacing gas distribution systems that are leaking methane.
The coalition’s focus could also include clean energy industry creation through both innovation and deployment investments. There are many candidates: advanced battery technologies and long-duration electricity storage, clean hydrogen supply and infrastructure, establishing regional technology innovation hubs, modular nuclear reactors, a new generation of carbon capture and removal projects — from power plants — industrial facilities and the air, offshore wind, integration of energy networks with artificial intelligence and big data capabilities, and more.
This should be paired with financing initiatives, such as renewable, advanced nuclear and carbon dioxide utilization and sequestration tax credits, an expanded loan program for supporting state Green Banks and clean energy for tribal lands and indigenous communities. In addition, perhaps the Clean Energy Department Administration — which had bipartisan support a decade ago — should be reconsidered.
Job creation in all of these areas should be underpinned by a network of private, public and union-supported apprenticeship and training programs that directly address the need for an expanded energy workforce. For example, the Building Trades Union alone offers training and apprenticeships at over 1,500 locations across the country.
While this is not an exhaustive list, it offers some examples of what an Energy Jobs Coalition could support in a new stimulus package — good for American workers, our economy and the planet.
Ernest J. Moniz was the 13th US Secretary of Energy (2013-17) and is the founder and CEO of the Energy Futures Initiative, a Washington-based clean energy nonprofit.
WHO: Countries that rush to lift restrictions risk 'severe and prolonged' damage to economy – CNBC
World Health Organization (WHO) Director-General Tedros Adhanom Ghebreyesus talks during a daily press briefing on COVID-19 virus at the WHO headquaters in Geneva on March 11, 2020.
Fabrice Coffrini | AFP | Getty Images
Countries that rush to lift quarantine restrictions designed to contain the coronavirus pandemic risk an “even more severe and prolonged” economic downturn and a resurgence in COVID-19 cases, World Health Organization Director-General Tedros Adhanom Ghebreyesus warned on Friday.
“We are all aware of the profound social and economic consequences of the pandemic,” Tedros said during a briefing at the agency’s headquarters in Geneva. “Ultimately the best way for countries to end restrictions and ease their economic effects is to attack the virus.”
Globally, more than 1 million cases of COVID-19 have been confirmed, including at least 55,781 deaths, according to Johns Hopkins University. The outbreak, which emerged in China a little over three months ago, has hit economies hard as cities shut down, putting people out of work.
Earlier in the week, WHO officials said they were deeply concerned about the rapid escalation and global spread of the outbreak.
Tedros on Friday called on countries to help their citizens by expanding social welfare programs, moving financial barriers and ensuring public health measures are “fully funded.”
“If people delay care or avoid it because they can’t afford it, they not only harm themselves, they make the pandemic harder to control and put society at risk,” he said. “This is an unprecedented crisis which demands an unprecedented response.”
On Monday, WHO officials said government lockdowns are not enough to contain the coronavirus outbreak. However, they are necessary, despite their impact on the economy and society, they said. Without them, the coronavirus would kill even more people.
“This is serious. This is a deadly virus, people will get through it, countries will get through it,” said Dr. Mike Ryan, executive director of the WHO’s health emergencies program.
World leaders need to build up their public health systems “if we’re going to get out of an interminable cycle of economically punishing lockdowns and shutdowns,” Ryan said. “We must get back to be able to control this virus, live with this virus, develop the vaccines that we need to finally eradicate this virus.”
WHO officials also said the coronavirus is impacting fights against other infectious diseases such as polio.
“In recent years, we have driven polio to the brink of eradication,” Tedros said Friday. Many health-care workers are now supporting the COVID-19 response, causing them to temporarily halt vaccinations for polio in some cases, he said.
In for a fundamental reset of the economy: insolvency trustee – KitchenerToday.com
Canadians across the country are waiting for their financial aid to arrive, as the COVID-19 pandemic brings the economy to a crawl. More and more people are applying to Employment Insurance, while others are waiting for the Canadian Emergency Relief Benefit application portal to open up, promising a quicker payout.
Many Canadians are finding themselves dealing without emergency savings to dip into; having to make difficult decisions around food, rent and other bills.
On Thursday, Doug Hoyes, Co-founder, Hoyes Michalos Insolvency Trustees appeared on the Mike Farwell Show on 570 NEWS to discuss the financial realities many of their clients are experiencing.
His advice comes down to priorities. People who have still retained their jobs or some kind of stable incomes during this time, he advises them to continue to pay down debts. For others not fortunate enough, he said to focus the essentials. Rent is considered last on that list. Courts are closed during this time, so people should not worried about getting sued for now. He did recommend talking with your landlord to find some common ground, but rent was not a priority compared to food or medicine.
“I do believe this will impact us just as 9-11 impacted any who whose had to travel since then; just as the Great Depression impacted our grandparents and great grandparents. If you lived through the Great Depression, you were frugal for the rest of your life,” he said.
The pandemic is expected to last a few months, which has Hoyes worried for the businesses and jobs, that may not be able to return after that period of time.
“How could you go with zero income; zero revenue for an extended period of time when the bills are still mounting. If this on for any length of time, it will be a very serious situation for employees, for workers, but also for the small businesses who employ them.”
He said he believes that “we’re probably in for a fundamental reset of the economy,” which will be the start of our problems, but also brings some relief with it. He said real estate prices could be going down in the aftermath of COVID-19, and will likely bring rent down too, making it more affordable for people to live.
On the otherhand, he said lenders may have given deferrals, but likely did not freeze the interest charges.
“The interest is still clocking in, and because you’re not paying down the debt, the principle is certainly not going down either, so you’re actually incurring more interest as a result of this.”
He said, he expects his office to get very busy around that time.
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