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Who will be the winners in a post-pandemic economy? – World Economic Forum

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  • Businesses that use cloud computing will not buckle under the pressure of the coronavirus pandemic.
  • Further automation and artificial intelligence will enhance the resilience of supply chains.
  • Successful businesses will have a combination of resilience and agility.

COVID-19 is putting the global economy into a tailspin. Many countries are heading for very sudden and unprecedented recession. This crisis will catalyze some huge changes. Few industries will avoid being either reformed, restructured or removed. Agility, scalability and automation will be the watchwords for this new era of business, and those that have these capabilities now will be the winners.

Thanks to government stimulus packages, liquidity is coming back to the market. It will keep enough of the economy afloat so that it can climb out of recession rapidly once the various lockdowns are lifted. But the way much of it is structured means that it will likely benefit already better capitalized larger businesses, over the smaller operators who may struggle.

It would be an over-simplification, however, to paint this new era as one of “big” versus “small”, or “incumbents” versus “upstarts”. The past decade’s tropes that pitted fintechs and digital natives against big banks and consumer brands will seem dated by the middle of this year.

Indeed, one could see the current times as the first real test of the digital-first business mantras that have been extolled over the first part of this century. COVID-19 will force a rebirth of many industries as we all sit at home in lockdown, re-assessing and re-imagining modes of consumption, supply, interaction and productivity. As president of a global technology firm, what intrigues me is where there will be paradigm shifts, as opposed to just existing trends either accelerating or decelerating.

For instance, the shift from cash to digital payments is clearly accelerating. My WEF Council colleague Huw Van Steenis, who is chair of the sustainable finance committee at UBS, highlighted that 31 countries have lifted contactless payment limits this year to support social distancing measures. In the UK, ATM usage was already falling between 6% and 14% a year, but has now plummeted by more than half. As he argued in his “Future of Finance” report, this has major implications for: the resilience of payment forms – young and old; for banks’ business models; and society, as we work to ensure no-one is left behind in an increasingly digital economy.

In the workplace we’re already seeing a super-charging of the nascent bring your own device (BYOD) trend in business technology. As people scramble to work and socialize remotely, previously niche tools such as Zoom, Slack, Microsoft’s Teams, and even the Houseparty app, are suddenly supporting millions of personal and corporate interactions every minute.

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Those businesses that have designed their solutions to use the full potential of cloud computing, will not buckle under the pressure. For instance, the cloud gives businesses easy access to digital payment methods. It has enabled companies to continue working, by rapidly and securely providing access to business applications to their employees working at home. Yet it also provides financial flexibility, allowing those seeing a slow-down to wind down the technology costs of business lines that are facing challenges.

Meanwhile, supply chains are having to reconfigure themselves in real time. As the demand for personal protective equipment (PPE), ventilators and other medication spikes, manufacturers are having to retool and reinvent themselves. For instance, the Royal Mint turned its hand to producing medical visors, while Dyson and many other manufacturers, large and small, are producing ventilators or PPE.

As large grocery retailers struggle to manage queues of disgruntled customers, smart local restaurants have been quick to turn themselves into retailers – repurposing their restaurant supply chains towards end consumers.

A new strain of Coronavirus, COVID 19, is spreading around the world, causing deaths and major disruption to the global economy.

Responding to this crisis requires global cooperation among governments, international organizations and the business community, which is at the centre of the World Economic Forum’s mission as the International Organization for Public-Private Cooperation.

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The Forum has created the COVID Action Platform, a global platform to convene the business community for collective action, protect people’s livelihoods and facilitate business continuity, and mobilize support for the COVID-19 response. The platform is created with the support of the World Health Organization and is open to all businesses and industry groups, as well as other stakeholders, aiming to integrate and inform joint action.

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As an organization, the Forum has a track record of supporting efforts to contain epidemics. In 2017, at our Annual Meeting, the Coalition for Epidemic Preparedness Innovations (CEPI) was launched – bringing together experts from government, business, health, academia and civil society to accelerate the development of vaccines. CEPI is currently supporting the race to develop a vaccine against this strand of the coronavirus.

This combination of scalable and agile capabilities is what will define the short and medium-term success of businesses, whether large or small. But in the longer term, change will have to be more fundamental. Resilience, combined with agility, must be the new focus of business leaders as we all emerge from this crisis.

To create long-term resilience we will likely see further robotic automation and artificial intelligence (AI) within our supply chains. These technologies reduce manual intervention and hand-offs, cutting transmission risks, and reducing the reliance on humans to work face-to-face. They can also enable production to scale and shrink in response to sudden demand.

Indeed, government interventions may have unintentionally accelerated this trend. Many countries’ fiscal stimuli amount to the largest scale experiment in Universal Basic Income (UBI) to date. UBI is considered by many to be a prerequisite for a successful AI-driven economy – by enabling businesses to potentially replace humans without impacting their welfare.

It’s clear that this crisis will cull a lot of outdated practices, yet many more than we might think will continue. We will always want to travel, to eat out, to be entertained, and to have experiences in person. Just don’t expect any of these activities to be unchanged. Or to be delivered by the same brands, and by the same means to which we’ve become accustomed.

We will emerge from this period stronger, wiser and more connected as a global society. Resilience will be at the forefront of every strategy, yet it is agility that will ensure competitiveness, and an ability to respond to the unexpected. To achieve this, businesses will have to re-evaluate where they must be strong and where they must be flexible.

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Economy

Economy adds surprise 290,000 jobs in May; unemployment rate at record level – The Globe and Mail

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A worker unloads a delivery of 200,000 masks at a Vancouver city depot, on June 3, 2020.

JONATHAN HAYWARD/The Canadian Press

Canada added 290,000 jobs in May after two months of brutal layoffs, a surprise turn for the job market as provinces have only recently begun to ease lockdown restrictions.

Despite the gain, the unemployment rate rose to 13.7 per cent, the highest since comparable data became available in 1976, as more people started seeking jobs.

“The surprisingly positive readings on employment paint a more optimistic picture of the early part of the recovery, but there’s still a long road back,” said Royce Mendes, senior economist at Canadian Imperial Bank of Commerce, in a note to clients.

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About three-quarters of May’s increase was in full-time positions, while the goods-producing sector (5-per-cent gain) snapped back more forcefully than services (1-per-cent gain).

In turn, men saw stronger employment growth (206,000) than women (84,000). Statistics Canada noted that among parents, women registered fewer job gains than men and were more likely to lose hours.

The total number of hours worked in all industries climbed 6.3 per cent in May, following a plunge of nearly 28 per cent between February and April. There were sizable increases in construction (19 per cent), wholesale and retail trade (11 per cent) and manufacturing (10.9 per cent).

Quebec accounted for nearly 80 per cent of May’s employment increase as it saw a net gain of 231,000 workers. The province allowed the construction industry to return in mid-April and other restrictions began to ease outside the Montreal area in early May.

Ontario was the only province where employment declined last month, although losses were less severe than in March and April. The first stage of the province’s reopening plan took effect after the Victoria Day weekend.

Going into Friday’s job report, it was widely assumed that Canada would experience another month of layoffs. The median estimate from economists was for employment to decline by 500,000 in May, following April’s loss of nearly two million and March’s drop of about one million.

This was partially the result of timing. Statistics Canada surveyed households on their work status between May 10 and 16. By then, many reopening stages had yet to take effect.

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Instead, Friday’s results surprised by showing that employers are already adding to payroll.

As Canada enters its summer months, there are mounting signs of economic activity picking up. Hiring site Indeed Canada has seen a recent uptick in new job postings. Consumer spending, while lower than a year ago, has improved in recent weeks, according to Royal Bank of Canada transaction data. And home and auto sales have perked up, as has business sentiment.

Still, it’s shaping up to be a long recovery in the job market. Many companies are reopening to weaker sales and larger debt obligations, making it difficult to staff at prepandemic levels.

Only 13 per cent of small business owners are planning to add to full-time staff in the next three months, compared to 37 per cent who are planning to cut back, according to recent survey results from the Canadian Federation of Independent Business.

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U.S. economy added 2.5 million jobs in May as states reopened from COVID-19 shutdowns – CBC.ca

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The unemployment rate in the United States unexpectedly fell in May and layoffs abated, the Department of Labour said Friday in a report that showed the latest signs the economic downturn caused by the COVID-19 pandemic was bottoming.

The department’s closely watched monthly employment report showed the jobless rate dropped to 13.3 per cent last month from 14.7 per cent in April. Nonfarm payrolls rose by 2.509 million jobs after a record plunge of 20.687 million in April.

Economists polled by Reuters had forecast the jobless rate jumping to 19.8 per cent in May from 14.7 per cent in April. Nonfarm payrolls for May had been expected to fall by eight million jobs.

The jobs market improved considerably in the second half of May as businesses reopened after shuttering in mid-March to slow the spread of COVID-19. Consumer confidence, manufacturing and services industries are also stabilizing, though at low levels, signs the worst may be over.

“The good news is that we probably have hit the bottom,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “But the recovery will be painfully slow. It will take years, probably a decade to get back to where we were at the end of last year.”

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Canada can hit climate targets without ruining economy, economists and climate experts say – CBC.ca

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Last November, the United Nations Environment Program released its annual Emissions Gap Report, which found that in order to limit global warming to 1.5 C above pre-industrial levels, CO2 emissions would need to drop by 7.6 per cent annually over the next decade. 

Given that worldwide emissions are estimated to have risen by about 0.4 per cent in 2019, this seemed like an unattainable goal.

A recent study published in Nature Climate Change, however, suggests that as a result of global shutdowns due to the COVID-19 pandemic, emissions in 2020 could drop by roughly seven per cent.

At first glance, it might appear as though a devastating economic shutdown is the only way to reach those UN targets. But some experts say this isn’t the case, and insist there is a way to have economic growth and reduce emissions that adhere to the UN guidelines.

Storefronts in Ottawa’s Glebe neighbourhood are reflected in a window sign on March 24, 2020, during the COVID-19 pandemic. (Justin Tang/The Canadian Press)

“We can’t have this [kind of a shutdown] for tackling climate change — absolutely not,” said Corinne Le Quéré, a Canadian professor of climate change science at the University of East Anglia and lead author of the Nature study. “This is a really painful way to get a decrease in emissions.” She also noted that it likely won’t last.

Don Drummond, an economist who worked for the federal Department of Finance for 23 years, pointed out that emissions in Canada have almost flat-lined, on average, over the past few years during a period of economic growth (prior to the coronavirus pandemic).

This, he said, is evidence that reducing emissions to UN guidelines is possible.

“We’ve achieved higher growth with flattening emissions and we can and should go further and achieve positive growth with declining emissions,” said Drummond, an adjunct professor at Queen’s University and former chief economist at the Toronto-Dominion Bank. “That can be done, but we need a more concentrated policy effort.”

New opportunities

Drummond, who was one of the architects of the Goods and Services Tax in 1991, said there is a long history in Canada of scare-mongering that a given new policy will kill the economy, from the GST to the North American Free Trade Agreement. Quite often, it doesn’t.

Many governments around the world are trying to stimulate their economies during the pandemic, and this could be an opportunity to funnel money into green technologies, said Le Quéré.

There’s been an increase in the popularity of e-bikes, a green alternative to getting around cities. (Francois Mori/Associated Press)

She said that one of the key findings of the Nature study was that the biggest drop in emissions during the pandemic, behind the aviation industry, has been in surface transport. This, she said, could be one sector governments could target.

“The biggest reason why the emissions [went] down now is mobility. So we just don’t go anywhere. We don’t use our cars. Governments could say, ‘Well, we’re going to tackle that as we get out of confinement,'” Le Quéré said. That could “include everything from encouraging home-working for those who want to and who can, then developing infrastructure for … walking or cycling.”

While Drummond believes the federal government is likely to invest in methods to reduce emissions, he said it will likely be a long time — perhaps years — before we see stimulus packages aimed at revitalizing the economy, such as specific jobs programs.

In the meantime, he said the government can use other means to reach the 7.6 per cent emissions-reduction goal, such as disincentives — like the carbon tax on things like gasoline and heating fuels — which can be effective in bringing down emissions, particularly when that money is recycled back to people and businesses, as the federal government is doing.

“If you have the right incentives or the right disincentives in place, there can be growth that takes place that is not environmentally damaging,” Drummond said. 

“I would say put a price on it … that’s what it really comes down to.”

Another could be investing in retrofitting buildings to make them more efficient, which would be very labour-intensive and could create more jobs. But Drummond said that would be “second best.”

On the path

Mark Jaccard, a professor of sustainability energy at Simon Fraser University, said transitioning to renewable energy isn’t as costly as some may think it is.

He said it would cost “at most, two years of economic growth spread over a 30-year period.” (In recent years, Canada has experienced annual growth in the 1.5 to 1.9 per cent range.)

Jaccard, who is currently working on the next IPCC report, said that this small sacrifice over an extended period of time is far better than the alternative.

Flood waters breach the Gatineau River and flood the neighbourhood in Gatineau, Que., in May 2017. More extreme weather is one consequence of climate change. (Sean Kilpatrick/CP)

“It’s a slight difference in economic output over a 30-year period in order to prevent the dramatic crashing in your economy because of wildfires, acidified oceans, rising seas, major storms and pandemics that can happen from climate change,” he said.

Drummond agrees, noting that concerns about emissions reductions harming the economy will likely always be around, even if they are without merit.

Canada is already on the right path, he said, and the country can ramp up its efforts to see both economic growth and a notable reduction in emissions.

“It’s not like we’re asking to do something that’s never been done before. We are doing it right now, we’re just not doing it enough,” he said. “If you asked me to move a three-tonne rock, if I can move it an inch, I’m pretty sure I can move it a foot.”

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