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Spelling out the economic recovery options as the world starts to reopen from COVID-19 – CBC.ca

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As economies around the world take their first, tentative steps toward restarting, Canadians are beginning to wonder what life may look like on the other side of this pandemic.

The answer to that open-ended question depends in large part on what sort of recovery we are looking at.

When asked to weigh in on the shape of things to come, one of the best ways economists have come up with to lay out the options is based on letters of the alphabet. 

Will the recovery look like a V or more like a U? What about a Nike “swoosh” or something wobbly like a W? Or the worst case scenario — will we take the dreaded L?

Even the chair of the U.S. central bank finds himself talking about these ABCs of late instead of his usual ones, twos and threes. 

“Yeah, there are letters,” Fed chair Jerome Powell told 60 Minutes on Sunday. “People are fascinated by the possibility of different letters.”

Powell said he thinks the economy will begin to recover in the second half of this year, but the future, as always, is uncertain.

He’s not the only one having trouble spelling it out.

“Everyone’s turned into a geometrist,” said Karl Schamotta, chief market strategist at foreign exchange firm Cambridge Global Payments. He said there’s been a lot of talk about the various letter shapes of a recovery, with only one consensus emerging so far

“There’s virtually no one who thinks there will be a V-shape recovery,” he said. 

Ecomomists describe economic recoveries after recessions based on the letter shapes they tend to resemble (Joan Dymianiw/CBC)

The front end of the crisis has happened and certainly looked like the start of a V — a steep, straight drop. The question is how fast and how sharply the economy will surge back to life or whether it will linger for longer at the bottom and take its time climbing back.

Schamotta believes the most likely scenario is a more gradual climb back — “something like a Nike swoosh,” as he describes it.

The shape of things to come

That’s because Schamotta and most experts believe nothing about this crisis will be straight forward. Even a long slow climb back to normalcy will be come with setbacks.

One dreaded scenario is the so-called W-shaped recovery. Just as the economy opens up and begins to rebound, a new outbreak will force everything to close down again. Some models predict many stops and restarts; a series of W’s with reopenings and closings as outbreaks occur.

And different sectors will reopen and readjust differently.

“Across industries, no two recovery paths are likely to be identical,” TD Bank senior economist Brian DePratto said in a research note.

TD Bank sees most sectors of Canada’s economy recovering in one of three ways.

Arts, entertainment, travel and tourism are projected to see an L-shaped scenario with a huge plunge and a long path back to some semblance of normalcy.

That’s bad news for cruise ships and hotels, but other businesses are looking at much more optimistic recoveries.

“Some sectors, such as food retailers and transportation, are likely to see only a modest near-term hit and a quick recovery, placing them among the Vs,” DePratto said.

The rest of the economy is probably looking at a U — a sustained period of pain followed by an eventual, gradual rally back up to where they were before this all started.

Unlike any other recession

The near universal uncertainty around this crisis is just one of the things that sets it apart from previous downturns.

“This is not an economic event, this is a health event,” said Goldy Hyder, the president and CEO of the Business Council of Canada.

As such, he said navigating the pandemic requires everyone to think differently.

The 2008 financial crisis was staggering in its size and scope at the time, but, by comparison it was a fairly simple crisis to manage. 

Canada’s recession in 2008 and 2009 followed the path above, which sort of looks like something between a V and a U. (Joan Dymianiw/CBC)

Policymakers took action to prop up financial infrastructure, leaned on traditional stimulus programs to get people back to work and lowered interest rates to encourage consumers to borrow and spend.

Once the economy bottomed out, the climb back was fairly swift.

This one likely won’t be because it’s a different type of recession.

“We’re dealing not just with a medical virus that has impacted how we behave,” said Schamotta. “We’re also dealing with a psychological virus and the question now is when do we feel comfortable, when do we return to those behaviours?”

Fear is spreading like a virus

Hyder agrees and said instead of traditional stimulus, what’s needed is a boost in confidence.

“There is no jumping into the deep end here,” said Hyder. “There is tiptoe your way in, one step at a time from the shallow end.”

Consumers are scared and worried about spreading the virus, Hyder said, and businesses know the risk of reopening too early.

“What happens if you open up the economy and no one shows up?” 

Just as different parts of the economy took different hits from COVID-19, they will also face different recoveries. (Michelle Nichols/Reuters)

Hyder said  you can flip a switch and open stores and services, but convincing consumers to return to previous habits will be a tougher task. Any recovery model would be wise to remember that.

“It’s not any letter, it’s an oscillator fan,” said Hyder, and that scenario would come in and out of recovery for a long period of time.

“Multiple Ws together is a scenario that many people feel is possible.”

It may be daunting and disheartening to imagine the many ways in which the recovery can derail, the ways in which the outbreak may linger and dampen economic growth for a longer time than we initially thought.

‘Short memories’

But Schamotta has one caveat to all the worst-case scenarios.

“Humans have very short memories,” he said. “It’s extremely likely that human beings become fatigued of this and move on and snap back to old behaviours.”

Schamotta said that because humans have an innate desire to get back to something they recognize as normal, and that’s likely to be the case this time around, too. What shape that new normal takes is anyone’s guess, but with the alphabet soup of options on the table, one thing is certain: COVID-19 needn’t necessarily spell doom for the world’s economy.

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Calm before the storm for Japan suicides as coronavirus ravages economy – National Post

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TOKYO — The phones at the Tokyo suicide hotline start ringing as soon as it opens for its once-weekly overnight session. They don’t stop until the lone volunteer fielding calls from hundreds of people yearning to talk signs out early the next morning.

Both operating days and volunteer numbers at the volunteer-run Tokyo Befrienders call center have been cut to avoid coronavirus infection, but the desperate need remains.

“There are so many people who want to connect and talk to somebody, but the fact is we can’t answer all of them,” center director Machiko Nakayama told Reuters.

Health workers fear the pandemic’s economic shock will return Japan to 14 dark years from 1998 when more than 30,000 people took their lives annually. With the grim distinction of the highest suicide rate among G7 nations, Japan adopted legal and corporate changes that helped lower the toll to just over 20,000 last year.

Worried the current crisis will reverse that downward trend, frontline workers are urging the government to boost both fiscal aid and practical support.

“We need to take steps now, before the deaths begin,” said Hisao Sato, head of an NGO that provides counseling and economic advice in Akita, a northern prefecture long known for Japan’s worst suicide rate.

National suicides fell 20% year-on-year in April, the first month of the country’s soft lockdown, but experts said that was likely due to an internationally recognized phenomenon in which suicides decrease during crises, only to rise afterwards.

“It’s the quiet before the storm, but the clouds are upon us,” Sato said.

Prevention workers see echoes of 1998 when a sales tax hike and the Asian economic crisis first drove annual suicides above 30,000, then to a peak of almost 34,500 in 2003.

Economic circumstance is the second biggest reason for suicides, behind health, according to 2019 police data, which also shows that men are nearly three times more likely to kill themselves than women, and most are in the 40-60 age group.

The current crisis, which is forecast to shrink Japan’s economy 22.2 percent this quarter, is especially dangerous for cash-strapped small and medium-sized businesses for whom government subsidies might not arrive in time.

“It’s tough. A lot of people are really worried,” said Shinnosuke Hirose, chief executive of a small human resources firm that has lost nearly 90% of its business. “It’s like waiting at the execution grounds to see if they survive or not.”

A Health Ministry official in charge of suicide policy told Reuters his department planned to ask for more money from a $1.1 trillion central government stimulus package to help fund measures such as extra hotlines. The official, who declined to be named as he was not authorized to speak on the record, added there were limits to central government action and local efforts were crucial.

JOBLESS LINK

Some believe the steps taken in recent years to bring down the suicide rate will hold firm through the current crisis, but others are not so sure.

Kyoto University’s Resilience Research Unit has predicted 2,400 more suicides for each 1% rise in unemployment. If the virus subsides in a year, unemployment could peak at around 6% by March, lifting annual suicides to around 34,000, it estimated. If pandemic conditions persist for two years, a rise to 8% unemployment by March 2022 would see suicides spike over 39,000.

“Of course social support is important … but they won’t be able to ramp this up suddenly,” said unit director Satoshi Fujii. “Preventing bankruptcies will start helping immediately.”

At the Tokyo Befrienders call center, the phones continue to ring. The formerly nightly service now opens on Tuesdays only, with one volunteer a shift instead of four, although it plans to reinstate another day in June.

“Everyone has tried hard to get through lockdown, but now they’ll reflect and think ‘why was I doing it? What hope do I have?’” Nakayama said. “At that time I think a lot could choose death.” (Reporting by Elaine Lies; editing by Jane Wardell)

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Nova Scotia's stimulus plan a good start in rebuilding devastated economy, economist says – TheChronicleHerald.ca

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HALIFAX, N.S. —

A $230-million stimulus program expected to employ 2,000 Nova Scotians and rebuild important infrastructure assets is a needed emergency measure to rebuild an economy devastated by the COVID-19 crisis, but there’s plenty of pain still to come, warns a Halifax economist.

“For a province like Nova Scotia, $230 million of debt is significant but on the other hand we’re still focused on containing the economic pain that’s been caused by COVID-19 and I think that’s the first matter of focus,” said Melvin Cross, a Dalhousie University economics professor. “If you have 2,000 people otherwise unemployed and have them doing something that will add to the assets of the province then such a program is worth considering.”

Premier Stephen Mcneil unveiled the provincially funded plan on Wednesday when he announced the province’s economy would completely reopen on June 5. The provincial monies will pay for projects across the province, such as roads, bridges, school repairs and museum, courthouse, and hospital renovations. Statistics Canada reported earlier this month that 50,000 jobs were lost in Nova Scotia in April.

The professor said the program is a reasonable first response in addressing “the economic pain we see people experiencing.”

“Will we have more discussions about the details of this program and have some dissatisfaction with it, probably. That doesn’t mean the concept is unsound.”

Cross said there’s a possibility that the Bank of Canada would pony up cash to pay a portion of the stimulus program, much better than the alternative, he added.

“It would be unwise to increase tax rates in the economy that’s already lumbered with unemployment and businesses struggling to deal with the consequences of COVID19.”

Scotiabank released a report earlier this month predicting Nova Scotia could feel less economic pain caused by COVID-19 compared to other provinces.

The report said besides Saskatchewan, Nova Scotia is the only province likely to avoid record deficits in the 2021 fiscal year. Yet it predicts Nova Scotia will have a roughly $970-million deficit.

While the government has a key role to play in assisting businesses and rebuilding the economy there’s a limited pot of money available, said the professor. He likened the province’s predicament to fighting a raging fire with only a limited water source available.

“If we drained too much water out of the lake and you have to stop, well do you have the fire controlled yet?” said Cross. “Well, you say at what point do you decide it’s not appropriate to use water to put out the fire?”

The Chronicle Herald inquired with the province about the economic consequences of the stimulus plan, including whether it’s now in a deficit and if money has to be drawn from other government departments to pay for the program, but did not get answers to those questions.

Cross said as long as there’s no effective treatment for COVID-19, the province and country can expect to feel significant economic pain.

“We might get a bit of relief this summer If COVID-19 acts the way better understood flu viruses act but the epidemiologists tell us that we must be prepared to manage a second wave of COVID.”

Patrick Sullivan, CEO of the Halifax Chamber of Commerce, said he was pleased with the province’s decision to reopen those businesses closed during the lockdown, including restaurants, hairdressers and gyms. A $25-million Small Business Reopening and Support Grant was also announced on Wednesday for eligible businesses, nonprofits, charities and social enterprises to open safely. That amounts to $5,000 grants to businesses to purchase public health equipment necessary to reopen their business; money that’s badly needed and appreciated, said Sullivan.

“But there’s still concern restaurants will only be reopening at 50 per cent capacity and there will likely be reduced tourism this summer. We appreciate the need to operate safely because we don’t want this to happen again. “

Because of restrictions on international travel, tourism operators in the province face a daunting summer season. He’s encouraging Nova Scotians to choose a staycation to support the sector and advocating for the government to introduce a $2,000 accommodations tax credit to incentivize people to stay home.

He said businesses are in need of plenty more support but said there are still assistance programs available to small businesses through ACOA and Community Business Development Corporation. Sullivan said the federal Canada Emergency Commercial Rent Assistance Program, offering to cover 75 per cent of rent for small businesses, is flawed and has limited uptake largely because it’s optional for landlords. He said financial assistance should be made available to the tenant, not the landlord.

In the end, he couldn’t predict how many businesses in Halifax might be forced to close.

“I don’t know and don’t think anyone does right now I think the majority of businesses have tried to get their way through this to get a reopening day.”

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As economy falters, restaurateurs look back at oil boom that gave rise to fine dining – CBC.ca

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It was 2012 and times were good in Newfoundland and Labrador.

Oil was flowing offshore, and expensive bottles of wine were flowing in restaurants around St. John’s.

Jeremy Bonia remembers the days when a barrel of oil sold for $120, and a bottle of wine could easily fetch more.

“I mean, we were doing well,” he said with a smirk while standing in front of his restaurant, Raymonds, on Water Street in St. John’s.

The booming economy paved the way for new possibilities on the city’s food scene — high end dining for people with money to spend, and corporations looking to impress potential clients.

There was as much business being done at the dinner table as the boardroom table, and people like Bonia used the influx of riches to build their dream restaurants.

Those places are empty now, as a pandemic and plummeting oil prices have wreaked havoc on the already fragile economy in Newfoundland and Labrador.

Bonia and co-owner Jeremy Charles were forced this spring to lay off about 100 staff members between Raymonds and their other restaurant, The Merchant Tavern, with no idea if or when they could bring everyone back.

Everything is changing

High-end restaurants depend on tourism to make money in the summer months, and are kept afloat throughout the offseason by major industry players, like oil and gas companies.

But when it comes to the symbiotic relationship between oil and restaurants, most of the damage was done before the world knew about COVID-19.

The riches of 2012 were followed by a crash at the end of 2014. The yearly average price for a barrel of oil plummeted from $98.97 to $53.03, and the big players on the Grand Banks started slashing.

“We started to see companies scale back either office sizes, or team sizes, and expense accounts as well,” Bonia said.

“Just the amount of meetings and physical people on the ground started to scale back quite a bit.”

Without a strong economy to prop up the restaurant industry throughout the offseason, Raymonds closed its doors for the winter this year. The decision was made before COVID-19 was on anybody’s radar.

In the historic Quidi Vidi Village, chef Todd Perrin knows all about the rise and fall of oil prices at Mallard Cottage.

Oil had been the catalyst to exploring the world of fine dining with traditional cuisine — places where concoctions of wild game and locally-sourced vegetables could fetch a pretty penny.

Todd Perrin, pictured in this file photo, cuts a cooked lobster at his restaurant, Mallard Cottage, in St. John’s. (Gary Locke/CBC)

“It made it possible to operate a restaurant and be able to pay the bills,” Perrin said. “At the beginning of my career, it was a tough market. When oil really hit, and St. John’s was full of people attached to the oil industry with expense accounts, it made a big, big difference.”

By the time the expense accounts shrunk, places like Raymonds and Mallard Cottage already had reputations bolstered by profiles in publications like The New York Times to help carry them through the leaner years. 

Those international awards and glowing reviews meant tourists were flocking to get in during the summer seasons.

Now, with no tourists due to COVID-19 restrictions, Bonia said he knows they’ll have a hard time continuing the way they had for a decade.

While other restaurants are relying on locals eating out to keep them afloat, he said that’s not likely with a place like Raymonds — especially with more than 30,000 jobs lost in the province since March.

“Fine dining is a niche thing. It’s not something we expect people to come out and do once a week, once a month even,” he said. 

“Raymonds will definitely feel it more than other restaurants.”

How oil will affect the next generation of chefs

But it’s not just local restaurants that are feeling the effects of the downturn in oil.

Roger Andrews, an advanced cooking instructor at the College of the North Atlantic, said he can look at his students on the first day of class, and pick out the ones who aspire to be the next celebrity chef.

He makes it his goal to give them the advice they need to hone their skills, but to also open up their minds to more realistic pathways.

With a downturn in the economy, students can expect fewer restaurants taking people in for internships, but that doesn’t necessarily mean a lack of options.

“Where they’re actually going to go is the big thing,” Andrews said.

“Perhaps we’re not teaching them for the restaurant setting as much as we would for the old age home.”

Roger Andrews is a chef and instructor of the advanced cooking program at College of the North Atlantic in St. John’s. (Gary Locke/CBC)

Another perk of the offshore oil boom was an uptake in the college’s marine cooking program.

People that grew tired of working in the volatile world of restaurant kitchens were returning to upgrade their education and head offshore. Oil companies handed lucrative salaries to cooks, who were ditching meagre pay onshore to head out on the rigs and supply vessels in the North Atlantic.

“They have families, want something more stable, or they go chasing money,” Andrews said. 

“You’ve got big oil offering up someone $100,000 a year — people are going to take that.”

Newfoundland and Labrador’s offshore has lost at least one oil platform for up to two years, and public figures from the premier to the president of Memorial University have called on the federal government to support the industry to prevent further losses.

Andrews expects the restaurant industry will thin out, too, with the combination of pains being inflicted on the province from all sides — Muskrat Falls in the north, offshore oil in the east, and a lack of tourists entering the province from the west.

“It’s a dog-eat-dog world, where you have to be very unique, and interesting and different,” he said.

“I can foresee with a bit of a change in the economy, the number of those restaurants will have to drop down a little bit, unfortunately.”

Raymonds is a fine dining restaurant in downtown St. John’s. With executive chef Jeremy Charles and sommelier Jeremy Bonia at the helm, the restaurant has earned high praise on the global stage. (Eddy Kennedy/CBC)

Jeremy Bonia hopes that won’t include Raymonds. To save his neck, he’s willing to alter the formula that made the restaurant a hit with critics around the world.

“We look forward to the day we can go back to what we were doing before,” he said.

“I’m sure we’ll open Raymonds, it just may be a different capacity, maybe as a different concept for a little bit.”

Bonia and Charles have had offers thrown at them before to leave behind their home province and start new ventures on the mainland, but they’ve resisted those — and Bonia said, they will resist more.

 “We’re not here for the weather and we’re not here for the money. We’re here because we love living here,” he said.

This coverage is part of Changing Course, a series of stories from CBC Newfoundland and Labrador that’s taking a closer look at how the COVID-19 pandemic is affecting local industries and businesses, and how they’re adapting during these uncertain times to stay afloat.

Read more from CBC Newfoundland and Labrador

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