Why This Recession Is Different, And How Maritime Governments Can Get Through It
Devastating. Severe. Unprecedented.
The Conference Board of Canada’s provincial economic outlooks predicts record-shattering impacts to the Maritimes’ economy over the next few months.
Economists at the think tank believe the impacts of COVID-19 will be felt for years, but say that with careful planning the region can get back to some kind of normal before too long.
Todd Crawford is an Associate Director with the Conference Board, based out of New Brunswick.
He says that even compared to past recessions, what’s happened to the Maritime economy is like “nothing in our lifetime.”
The Conference Board predicts Nova Scotia’s GPD will contract by 3.6 percent in 2020, while New Brunswick’s will shrink by 3.3 percent.
This will cause a “severe” fallout in the labour market.
In Nova Scotia, the Conference Board says 45,000 people will lose their jobs between April and June as provincial unemployment hits a record-breaking 17 percent.
New Brunswick, meanwhile, will lose 10,000 jobs over the course of 2020 as unemployment hits 10.7 percent.
Crawford says the numbers are so extreme they almost don’t matter.
“What I would really like people to focus on is not necessarily on the numbers themselves because, no matter how you choose to look at it, the contractions we’re seeing are unprecedented,” he says. “It doesn’t matter if the economy is 30 percent shut down, 35 percent shut down, 25 percent shut down: it’s very, very, very bad regardless of the number,” he says
What’s different this time?
Crawford says COVID-19 is the worst economic crisis in our lifetime because it wasn’t triggered by the usual economic forces.
“Typically, a recession is caused by a shutdown in demand: something happens and people can’t spend money anymore. The market goes boom, everybody feels poor, there’s a big shock to how much consumers and firms are willing to invest,” he explains.
But this time it’s not just a shock to demand. Large swaths of the economy have been forced to close because of government intervention, so people can’t spend money even if they wanted to.
Crawford says that combination of supply shutdown and drying-up demand is what tanked the economy at record-breaking speed.
And the fact that normal economic forces are being held hostage by a public health crisis will drastically affect our eventual recovery.
How Will We Recover?
The Conference Board of Canada predicts that Nova Scotia and New Brunswick’s economies will start creeping back to normal by September 2020.
But that will only happen if governments can control the spread of COVID-19 and non-essential businesses start to open again.
Recessions generally end when an economic trigger gets people spending again. Maybe governments pump loads of money into infrastructure spending, or interest rates fall enough that people start spending again.
But as Crawford reminds us, the COVID-19 recession has nothing to do with consumers or businesses and their desire to spend money.
“Our economy’s ability to recover is not based on anything economic-related, it’s entirely based on public health assumptions. Everything is wrapped up in the virus itself,” he says.
That means there’s no way for an economic trigger to kick off a recovery like it normally would. Instead, things will probably only get a little bit better bit by bit, as things start to reopen.
But Crawford says it could take up to a year, maybe even 18 months, for the economy to regain its former strengths (deeper effects could last 3-5 years, or longer). And that will only happen once a COVID-19 vaccine is discovered.
“The vaccine will be the trigger that finally lays the foundation for us to have a full, full, full recovery,” he says.
What’s The Best Path To ‘Full’ Recovery
Because the Maritimes are in economically uncharted territory Crawford says the region’s economic recovery probably won’t look like anyone expects.
“This recovery will be very chaotic and so the provinces that have a defined plan that they can communicate to individuals, that they can communicate to businesses, will be in a stronger position to come out the other side of this with as much of their economy intact as possible,” he says.
In order to accomplish that, Crawford says governments will need to focus on a few key things as the economic recovery begins.
The most important will be for governments to act on the best science possible and clearly communicate public health measures in order to stop the spread of COVID-19.
Once the virus is under control, the next big step should be easing public gathering restrictions to let more people come together in the same place. Crawford says restaurants and retail establishments will be particularly keen to see this happen because it will be the step that lets them start opening their doors again.
After that, governments will need to establish when cross-border travel can start again. This will be important to get the tourism industry back on its feet, which will, in turn, revive supporting businesses like hotels and hospitality.
However, Crawford says none of this will be effective if governments don’t do everything they can to support small businesses because they are responsible for “the vast majority” of job creation in Canada.
Doing that will mean spending to keep them going “for a period that extends well beyond COVID.”
But even then, he says, the pandemic will still shut down many small businesses for good. Governments will need solid plans for helping them reopen, or to attract new ones in their place.
“If we can give businesses a clear pathway to what the government approach will be over the next 18 months, then those entrepreneurs that are currently sitting on will have the information that they need to plan for their next business ventures,” Crawford says.
“Information from government to businesses has never been more important than it is right now.”
He says all levels of government are actually doing a pretty good job right now, and if that keeps up the region will get through the crisis.