COVID-19 and the economy

On January 26, the Alberta Business Support Network (BSN) held an online meeting, the first for 2021. The group consists of community leaders and business owners from nearby municipalities. The BSN aims to build strong partnerships within each community and throughout the region while addressing common workplace challenges. Alberta BSN partner regions include the Town of Whitecourt/Woodlands County, Town of Mayerthorpe/Lac Ste. Anne County, the Town of Fox Creek/MD of Greenview, and the Town of Barrhead/Barrhead County.

The guest speaker for the meeting was Todd Hirsch, the Vice President and Chief Economist for ATB Financial. During his presentation, Hirsch spoke of Alberta’s economy and how he felt the future would pan out. “We are pretty confident that somewhere in the second half of 2021, we will see a broader reopening of the economy, and we are going to see the economy rebound, but it matters who you are as to what the rebound is going to look like.”

He said that for some workers, the recovery is going to be very strong and happen quickly. “These would be knowledge workers, professional occupations, and higher-income earners,” said Hirsch. He said that people in those fields, during much of 2020, could work from home. “A lot of us joked in 2020 that everyone was working from home, but in fact, Stats Canada describes only about 25-30% of Canadian workers have the kind of job where it’s possible to work from home. “So, if you had the type of job where you could work remotely and had the technology available to you to work remotely, almost by definition, you are a higher income earner, and you were not hit as hard by COVID.”

He quickly moved to clarify his statements, not to be misunderstood. “No question, everyone was disrupted personally and emotionally and physically, and it was a hardship for everybody even those working from home but for those knowledge workers, the ones able to work from home, at least their income was not disrupted to the same degree.” He added that job losses in those sectors were also less than in others.

Hirsch explained that those who didn’t see interruptions in their income and who were able to amass some savings due to not having as many things to spend money on, such as travel, will likely have a nest egg to utilize. “A lot of these workers, once the economy opens, are going to be in the mood to get out there and enjoy it.” However, Hirsch said there is another side to it. “There’s going to be a distinct non-recovery for a lot of other workers. These workers tend to be concentrated in the service sector, especially industries like food and accommodation, parts of the energy industry, construction-type jobs, and healthcare. These are basically the jobs where working from home is not a thing.”

Though government income supports helped lower insolvencies, the reality is that many are relying on those supports, and as Hirsch explained, those supports eventually must come to an end. “When they do end, a lot of these workers will find that their job is still not back because we do expect a lot of businesses in these sectors will simply not reopen after the restrictions lift. This is going to be a real hardship and could be quite distressing for a lot of workers.”

To explain this type of variable recovery, where some will see a quick bounce back to normal and others will not, Hirsch used the letter K. The visual is that some will go up the angled point while others will go down the other. He said that those in the top part of the K recovery might think they don’t have to worry, but he suggested that everybody in Alberta needs to pay attention regardless of their situation. “The impact this could have is a widening of the disparity of income and opportunity among our citizens.” This widening of the disparity of income and opportunity has been ongoing since before COVID, but he said that a K recovery could make the gap even more expansive. “I don’t know what the solution to this is. I think what this is going to force us to do as citizens is to really sit down and be open to the adult conversation about what income support programs look like going forward.”

He spoke about redesigning income support programs since many used today have been in place for a long time without much change. He also brought up a Universal Basic Income but noted that he is on the fence about it. For 2021, Hirsch said that he feels that the energy sector will stabilize but that it will be at a lower level. “I think this is just the reality, even before COVID. We have seen six years of contraction in our energy sector with that original price collapse that started in June of 2014, almost seven years ago. But ever since that price collapse, 2015 to 2020 pre-COVID, the energy sector in this province has been struggling.”

He said that prices were lower during COVID but that oil prices aren’t looking too bad at the moment. “They aren’t back up to $100 a barrel, and they may never get there again, but they are back to pre-COVID levels. Natural gas, I think there is optimism there. We do think the energy sector stabilizes and maybe even grows a little bit, but we are starting now from a much lower base,” Hirsch said. “Overall, all provincially, we’re likely to see an unemployment rate still close to ten percent or eleven percent this year, but there’s going to be two nodes to this. The knowledge workers will probably be around six or seven percent, and the service sector workers will probably be closer to 15 percent.”

One thing that he said brings positivity is that he feels that the economy will evolve and adapt post-COVID. “Obviously, the energy sector is the backbone of our province, but the growth engines are now being handed off to other sectors. Three of them that I want to highlight where I think we will see the most growth, and most job creation in 2021 and beyond are the Technology and Digital sectors, Agriculture and Agri-foods including Forestry, and Renewable Energy and Clean Energy Technologies.” To view the meeting in full, visit www.albertabsn.ca and search for “Alberta’s Economy in 2021.”