Don’t expect quick economic recovery, B.C. economist warns

LANGLEY, B.C. – B.C. has done a good job containing the Covid-19 outbreak, but that doesn’t mean it will escape lasting economic fallout. Ken Peacock, vice-president and chief economist of the Business Council of B.C., gave members of the B.C. Trucking Association an economic update June 11, dousing any hope of a speedy recovery.

Peacock said he believes non-essential travel will remain restricted through the end of the year, that a vaccine will take at least 18 months to develop, that businesses will fail as government stimulus runs out, and that many temporary layoffs will become permanent. On the other hand, trends that were already emerging – such as telecommuting and increasing e-commerce – have accelerated and will be here to stay, Peacock predicted.

(Source: Statistics Canada)

He characterized the recession as “deep” and “nasty” and warned things could turn for the worse when federal spending runs out. “The government doesn’t have enough resources to make everyone whole,” he said. “Extraordinary efforts have been taken but at some stage when those payments stop flowing, businesses will fail and the government has to understand it absolutely cannot save and protect all entities in this downturn.”

Peacock said the global economy is headed into a steep recession, citing Organisation for Economic Co-operation and Development (OECD) numbers that predict all its member nation economies will contract in 2020. The recovery will be slow, Peacock warned, adding this recession is likely to be much deeper and longer-lasting than the global financial crisis of 2008-2009. Peacock said the global economy will contract 6% this year, with Canada’s falling 8% – worse, if there’s a second wave of the Covid-19 outbreak.

B.C.’s GDP is expected to fall 8% this year, and gain 5% in 2021, but will still fall short of pre-Covid levels.

Don’t expect quick economic recovery, B.C. economist warnsKen Peacock (Photo: Business Council of B.C.)

The province shed 132,000 jobs in march, and another 264,000 in April, bringing employment numbers to 2010 levels.   “A decade of job growth, evaporating in two short months,” he said, adding “there is no historical precedent for this decline.” One in four private sector employees were laid off in March and April, with a small rebound in May.

The younger demographic -workers between the ages of 15 and 24 – have been hit the hardest, with employment falling 36%. Provincial unemployment is expected to be 10% this year, and 8.5% in 2021, compared to just 4.7% in 2019. B.C.’s economy and its trucking industry are heavily reliant on exports, which tumbled in February as China closed its economy.

Peacock said it could be 2021 before exports recover. The province has set aside £1.5 billion for an economic recovery fund, but how it will be spent remains unknown.

“If things turn out to be a little weaker and a weaker growth scenario unfolds, it could take two, three, or four years to regain our lost output.”

Ken Peacock, Business Council of B.C.

The hit to B.C.’s economic output will total about £20 billion, and gains in 2021 will only recover about half of that. “Even though 4.8-5% (GDP growth) sounds great in 2021, it only gets us halfway back,” Peacock said. “It’s going to take another year of 3% growth to get us back.

If things turn out to be a little weaker and a weaker growth scenario unfolds, it could take two, three, or four years to regain our lost output.” In addition to an increase in telecommuting and e-commerce, other lasting effects may include shortening the supply chain and repatriating some manufacturing activity back to North America, and the reshaping of the retail landscape. Peacock pointed to Starbucks, which just announced it will close more than 200 stores in Canada.

“It’s just an example of many other companies that will do similar things,” he said.

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