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Canada's economy likely facing years-long recovery, economists say – National Observer

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Canada faces an unprecedented economic slowdown — the price of measures to contain the COVID-19 pandemic — that could take years to recover from, economists warn.

The fallout will emerge in stages, with estimates of the long-term damage largely dependent on efforts in coming weeks to both contain the outbreak and the risk of economic contagion.

“The speed at which we can come out the other side really depends on how much of the economy is left intact once we get through this,” said Nathan Janzen, a senior economist at Royal Bank of Canada.

The immediate risk is to the livelihoods of some two million workers in retail stores, hotels and restaurants, airports and other businesses that are either forced to close or are sharply curtailed, Janzen and other economists said.

The knock-on effects come when these people start missing rent and other bills, and the businesses that employ them decide they’re unable to re-open when the worst of the crisis passes.

Economists say an extended period of global economic malaise would in turn lead to a retrenchment in Canadian manufacturing. That would be exacerbated by extended restrictions at the border with the United States, by far Canada’s biggest trading partner and likely the next major epicentre of the global pandemic.

Slumping oil prices will further slow any recovery in the country’s energy sector, a major source of export income. While industries such as air transportation will struggle as long as global traffic is disrupted. Many households will likely remain reluctant to spend even after business closures are loosened, says Janzen.

“There’s a risk to all economic activity if demand for everything is lower, then production of everything is going to be lower, and I don’t know that there’s an industry that’s immune to that,” Janzen said.

He said Canada’s gross domestic product for the second quarter of the year could fall by double digit percentage points, and that “the first digit might not be a one,” while the unemployment rate may well have spiked above 10 per cent, compared to 5.6 per cent in February.

While the Conference Board of Canada expects the worst of the crisis to pass within a couple of months, it also put out an alternative outlook on Monday that considered the impact of Canadian and U.S. travel bans and social distancing stretching into August.

Their verdict? Real gross domestic product would fall by 1.1 per cent in 2020. In December 2019, they had expected 1.8 per cent growth for 2020, but trimmed their baseline assumption to 0.3 per cent growth in the early days of the pandemic.

That alternative scenario could prove too optimistic however, with an estimate that some 330,000 people lose their jobs in the middle six months of the year, pushing the unemployment rate to 7.7 per cent.

Some 929,000 people applied for federal Employment Insurance last week, Bloomberg reported on Tuesday, citing an official with knowledge of the data. A nearly 80 per cent increase to the 1.18 million unemployed people in Canada in February, according to official statistics.

“The kind of numbers we’re pencilling in right now are that we’re going to be feeling the effects of this not just this year, maybe not just next year,” RBC’s Janzen added.

Prime Minister Justin Trudeau rolled out an $82 billion COVID-19 relief package for workers and businesses on March 18, which RBC pointed out is a significantly smaller portion of GDP than other developed economies have offered. Trudeau has said there’s more to come.

Canada’s direct support for workers and businesses in so far smaller as a percentage of GDP than most global peers. Source: Royal Bank of Canada

But government intervention, while useful over the longer-term, isn’t going to save the short-term hit to the economy, RBC’s Janzen said.

“Putting more money in people’s pockets doesn’t help when you are telling people to stay at home, explicitly telling people not to go out and spend their money.”

The worry for David Macdonald, a senior economist at the Canadian Centre for Policy Alternatives, is that the money might not get in the hands of those who need it quick enough.

Close to half of working renters in Canada — or 1.6 million households — don’t have enough savings to pay their bills for more than a month if they lose their jobs, CCPA said in a new analysis released on Monday, with some 830,000 of those households unable to handle a week without pay.

“In the same way that patients with COVID-19 require rapid and accurate treatment, employees that have been laid off in order to contain COVID-19 also require rapid and immediate economic treatment,” he said. “Timing is a critical concern of mine.”

Macdonald says the EI system will require significant changes to make it fit to the task, given it typically takes almost three weeks from application to first payment at the best of times and is now overloaded with applications while Service Canada staff are not working at full capacity.

Economists warn COVID-19 is creating an unprecedented economic shock that Canada could take years to recover from, with one suggesting Q2 GDP could shrink by a fifth.

“The old rules and the bureaucratic, Byzantine process of application will have to be thrown away in favour of moving the money out quickly,” he said. “They’ll probably have to start enforcing payment, perhaps after 14 days they just start paying and work out the details after the fact.”

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Opinion: This Is What The Economy Looks Like Without Workers – BuzzFeed News

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The journalists at BuzzFeed News are proud to bring you trustworthy and relevant reporting about the coronavirus. To help keep this news free, become a member and sign up for our newsletter, Outbreak Today.

There has been a debate raging for decades about what the economy actually is, where economic growth comes from, and how to measure economic success. It took a public health crisis, a botched response, and a misplaced and dangerous proclamation by potentially the least economically informed president in US history, but that debate is now finally settled.

Before I explain how President Donald Trump inadvertently highlighted how progressives have been right about the economy all along, here is where the debate stood as of a few weeks ago:

On the one side were conservatives who argued that the most important aspects of the economy were corporations and wealthy “job creators” who, they claim, drive economic growth. According to them, all you needed to do to measure economic success was look at stock prices and corporate profits, and as long as they are high and rising, the economy is strong and growing.

These conservatives have spent decades pushing the idea that the best thing to do for the economy was for the government to get out of the way and allow the “invisible hand” of an unfettered marketplace to guide the economy. Not only would this allow corporations and the wealthy to create jobs and invest their gains, but, we were told, societal ills such as racial discrimination and gender disparities would eventually disappear, competed away by profit-seeking firms.

That view has driven policymaking for decades and shaped much of the economic discourse among business leaders and the media.

On the other side of the debate were progressives who have been saying for years that this dominant view of the economy has it absolutely backward. The most important aspect of the economy, we say, are the workers and consumers. And the best way to measure economic health and success is to look at how they, the people who make up the economy, are actually doing. Not the people at the top, not the corporations, not the stock market, but actual people. And not just some slice of them — all of them.

When everyday workers, families, and communities are thriving, the economy will thrive along with them. Conversely, if economic policies are focused on juicing the stock market or putting money into the hands of those so-called job creators — while allowing communities to be excluded, exploited, forgotten, or scapegoated — the economy will stagnate and underperform, will fail to deliver real prosperity, and will be inherently unstable and insecure.

Trump effectively conceded the debate to progressives in a recent appearance on Fox News.

He went on television and announced he wanted to get the country and the economy “opened up” and “raring to go” by Easter. This would have been an absolute catastrophe for public health and the economy because the only way for the economy to heal is by first stopping the spread of the virus. Luckily, he eventually reversed himself. But Trump’s wrongheaded desire to “restart” the economy revealed what “the economy” really is.

When the president talked about opening up the economy, he didn’t mean he wanted to open up the stock market — that was still open. He didn’t mean he wanted to “open up” corporate profits either. And he didn’t even mean he wanted all those wealthy “job creators” to go out and create jobs — they couldn’t, even if they wanted to.

What he meant was crystal clear and very telling. He meant that he wanted workers who were confined to their homes to go back to their workplaces. He wanted the factories that had been shut down because they didn’t have anyone to run the machines to be able to open again. He wanted people back out in the streets, in stores, hotels, and resorts — spending the money they had earned, creating a virtuous cycle of demand that drives robust economic growth.

This was even clear when he reversed his position and told people that social distancing would have to continue for longer. He realized that sickening or killing millions of workers would be even worse for the economy than keeping them home.

Nothing about the coronavirus pandemic makes this basic fact more true now than it has always been. The source of economic growth is, in a very practical and direct sense, the workers who create, produce, and deliver the goods and services that we all depend on and enjoy.

The more we fully include people in the economy — removing barriers like systemic racism and structural misogyny — the better off we will all be. Getting out of the way of rich people doesn’t create growth; it just creates opportunities for those rich people to use their power and position to hoard the benefits that come from growth.

There is a whole lot we need to do to pull our country out of this public health and economic calamity. But if there is one shared understanding I hope we can emerge from this crisis with, it’s this: We are the economy.

It’s a simple phrase, but it says a lot. The economy is not the stock market, or the bottom lines of a handful of massive corporations. The economy is the nurses, grocery store workers, warehouse and construction workers, and so many other workers and families. And when they aren’t prospering, the economy isn’t strong.

We are the economy, and we can join together — whether we are white, black, or brown, whether we were born here or we came here — to take back power from the wealthy and well connected and use it to invest in ourselves, unrig the rules, and include us all in the growth and prosperity that will follow.

This is true in a pandemic, as Trump not-so-eloquently highlighted. It’s true during good times, and it’s true all the time.

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How To Stop The Global Economy From Plunging Into A Depression? – Forbes

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There is little doubt that the global economy is in recession, which is defined by the IMF as growing less than 2% a year. Looming on the horizon is the even darker threat: global depression, which is characterized by a decline in real GDP exceeding 10% in more than one major economy and lasting for two or more years. This is the specter that governments are trying to stave off. In the U.S. and Europe, they are moving faster and throwing more resources at it than they did in response to the global financial crisis. The question is whether they will succeed. The answer hinges on knowing what stands between the current recession and a more catastrophic depression. 

The economic ravages caused by Covid-19 began with a disruption of supply that quickly weakened demand. It turns out that much of the economic impact of Covid-19 is due to the very measures needed to control the pandemic. When cities are locked down and people stay home to avoid contact with others, all economic activities in industries involving people in close proximity come to a halt. Consumer spending crashes because people are either too fearful or unable to go out and spend. As a consequence, businesses are in jeopardy; their revenues are drying up faster than they can cut costs, and many will have no choice but to lay off workers or even shut down.

The current recession will turn into a depression if business closures and layoffs spread unchecked, changing a temporary dip into a total collapse of demand that derails the economy. A self-reinforcing feedback loop will then lock revenue-starved companies and salary-starved households into a destructive, downward spiral—a global depression.

What stands between the current recession and a global depression is the survival of the business sector. Government efforts must therefore focus on supporting the business sector with policies that are direct, timely and effective. Tax holidays, rollover of loans, and suspension of payments of interest, rent and fees are a start.

What is really needed is for governments to help pay a portion of salaries so companies don’t have to lay off their workers as revenues dwindle. This will break the link between the initial decline in demand and a much more devastating economy-wide crash. Large companies and small businesses need help equally. Bernie Sanders and his comrades may rail against such a policy as a case of government of bailing out big businesses, but what they don’t understand is that large companies are key customers for many small businesses. And if big companies go down, small businesses will go down with them. And while giving every adult American $1,200 may be an expedient and certainly a popular measure for President Trump, it doesn’t do much to help households whose breadwinners are rendered jobless.

Time is running out. Job losses are rising rapidly. The U.S. Department of Labor reported March 26 that jobless claims that week rose to a record 3.3 million, up from 282,000 the week before. Ireland went from nearly full employment in February to losing an equivalent of 48% of all new jobs created in the last five years in March, according to Dublin’s Economic and Social Research Institute.

Governments may be throwing the kitchen sink at the problem, but the outcome depends on how, when and where the money is spent. The survival of the business sector is our best hope in warding off a global depression. We must ensure that it does.

Yuwa Hedrick-Wong is Chief Economics Commentator for Forbes Asia. He is also a visiting scholar at the Lee Kuan Yew School of Public Policy, National University of Singapore. Having worked as an economist across the Asia-Pacific, Europe, Middle East and Africa in the past 25 years, he regularly writes columns about the global economy for Forbes Asia. Views expressed are his own. He can be reached at: yuwa@forbesasia.com.

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Varcoe: With a global oil deal, Alberta's economy could finally catch a break – Calgary Herald

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Article content continued

“It buys us time. It’s not the solution,” said Schmidt.

A meeting of the G20 energy ministers, including federal Natural Resources Minister Seamus O’Regan, is scheduled for Friday. O’Regan spoke with Brouillette on Thursday and, in a Twitter post, said the two countries “will work together at the G20 to get oil prices stabilized.”

For Alberta, the prospect of an OPEC+ agreement arrives as the economic body blows keep on landing.

A new Statistics Canada report Thursday shows the country lost more than one million jobs last month as businesses shut down due to the virus.

In Alberta, more than 117,000 jobs disappeared. The unemployment rate jumped up to 8.7 per cent from 7.2 per cent in February, although the figure will likely be far higher for April.

There are many colossal problems facing Alberta’s economy today. More job losses are likely to come and many businesses may not re-open once the pandemic passes.

For realists looking across the landscape, it’s a forbidding environment.

But an end to the oil-price war is a necessary first step to rebuild a hard-hit economy.

Chris Varcoe is a Calgary Herald columnist.

cvarcoe@postmedia.com

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