The immediate economic pain from the second wave of COVID-19 won’t be as drastic as what we felt this spring, but the Canadian economy will still be dealing with the pandemic’s broader fallout for years to come, economists say.
While the second wave — and associated closures — will cause more layoffs, the immediate impact won’t be as widespread or as strong, said Jim Stanford, an economist with the Centre for Future Work.
“It’s not going to be as dramatic as the first time, because not as many things are being shut down, and we’ve learned to do some things more safely,” Stanford said.
The trouble will be much more narrowly focused this time around, said David Macdonald, senior economist with the Canadian Centre for Policy Alternatives.
“I think the pain won’t be as widespread as it was the first time, but it will still be very hard for people in hospitality, tourism, sports and entertainment,” said Macdonald, who estimated there could still be more than 270,000 layoffs in the Greater Toronto Area during the second wave.
Macdonald’s rationale for that figure is that it’s roughly how many people started working again after the GTA moved to Stage 3 from Stage 2 in late July, which saw the reopening of indoor dining, gyms and yoga studios, among others.
“As the GTA shuts down again, likely that number are on the line again,” Macdonald said.
Some of those job losses will become permanent as businesses that were barely hanging on after the first wave are forced to close their doors for good, Macdonald fears.
“There were a lot of places which just scraped through, and now that there’s a second wave and shutdowns, they’re likely saying, ‘Why bother?’ ” Macdonald said.
Even though the pain of second-wave shutdowns won’t be as widespread, Canada’s economy will suffer a COVID-19 hangover for years, Stanford predicts. The Canadian economy lost 3 million jobs during the first round of shutdowns, and has since gained all but 750,000 of them back. The rest won’t be quick to come back, he said.
“We’ve picked the low-hanging fruit. We’re in for several shaky years, even if there’s a vaccine tomorrow,” said Stanford, who pegs low consumer confidence and business spending as the biggest roadblocks to a full recovery.
“Part of it’s a sentiment thing, part of it’s reality. People don’t have as much money, and they’re worried about the future. Businesses aren’t going to be spending much either,” Stanford said.
Once the pandemic is behind us, the Canadian economy won’t suddenly bounce back, he said, adding there will be job cuts not caused directly by the pandemic, but by a lack of consumer spending.
“Because there’s not going to be as much demand, businesses are going to be deciding they just don’t need as many people,” Stanford said.
The economic recovery will still be hampered for a while, according to Pedro Antunes, chief economist for the Conference Board of Canada, but it won’t be because of consumers.
“I think consumers will be OK, post-COVID. The bigger problems will be business investment and the fiscal situation,” Antunes said.
Antunes pointed out that consumer spending has risen in many categories during COVID-19, and noted that some Canadians actually saw their savings grow during the pandemic.
“I’ve never seen that before during a recession,” Antunes said.
Business spending, especially on capital costs like new equipment, had been shaky even before COVID-19. Now, it’s going to be even shakier, he said. “Business spending is where a lot of our productivity growth comes from.”
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Governments, which have seen their deficits balloon by billions of dollars while spending heavily on COVID-19 aid such as the Canada Emergency Response Benefit and the Canada Emergency Wage Subsidy, will eventually need to tighten the purse strings, Antunes said.
“Governments have borrowed from the future to pay for these supports, 13 or 14 per cent of GDP. They won’t be able to keep spending like that because eventually they’re going to have to get their deficits under control again,” Antunes said.
That austerity will be bound to slow the economic recovery down, he added.
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