During and following the 2008 recession, the phrase “financial collapse” was often thrown around. This felt apt, given the top-down nature of the economic fall. First the finance and housing industry failed, which – like a toppling tower – impacted the layers of the economy below it until the entire interconnected global economy was caught in the free fall.
We often imagine the “economy” as one collective trendline that climbs and falls as a single entity. The current recession is unlike any other as it has led to a distinctly two-tiered recovery.
On one hand, many professional and technical fields are adapting to the pandemic, leading to a moderate rebound in consumer spending. In the early days of the pandemic, spending was largely affected by the uncertainty around how the economy and employment would be affected. However, as people worked from home and the government supports rolled out this summer, spending began to recover. Online shopping and home renovations increased exponentially, as did other areas of the economy that have been able to remain open.
On the other hand, the negative impacts of pandemic have been highly concentrated in Regina’s restaurant, accommodation, and retail sectors. Losses in these sectors are even worse than the unemployment numbers show. The current unemployment rate sits at 5.7% due to a loss of5,780 jobs compared to this time last year. Not included in these numbers are the additional 9,100 people who are who are no longer actively seeking work compared to this time last year.
Over the medium to long-term, the economy is expected to recover, but this will be highly dependent on the vaccine and our collective actions over the next few months. If things go well, the provincial economic (thanks largely to a bump in agriculture exports and a reopened economy) is expected to see a rebound of 4.7% Real GDP growth in the province.
How does this impact Regina businesses?
Pierre Cleroux, BDC’s Chief Economist, notes some specific trends that could be here to stay. Working from home is likely to last well into the future. Specifically, he notes that online trends will continue to grow and that survival in the future will depend on businesses being able to grow their online platforms and social media presence. This will require a significant shift for businesses and an investment into new technologies.
While we are not in the midst of a top-down economic collapse like the 2008 crisis, it’s important to keep in mind that the losses in local retail and hospitality can also have serious bottom-up effects. This is why it’s more important than ever to support local businesses and ensure that we steady the foundation of that tower.