VANCOUVER – CoVID-19 has become part of our everyday lives. Until vaccines are widely distributed, the latter of which could potentially take more than a year, the general sentiment seems to suggest that we need to adapt to a so-called ‘new normal’; a world where daily errands will require a mask, frequent hand sanitizing and compliance to social distancing cues. Accordingly, the effects of lockdown measures, which were put in place to prevent the further transmission of the virus, have brought the economy to a halt. Based on early estimates by the IMF, the impact of lockdown measures could potentially cost the global economy more than 12 trillion dollars over 2020 and 2021. For Canada, real GDP is projected to fall by 8.4 percent in 2020 from the year prior. Fortunately, a generous stimulus package released by the federal government has allowed Canadians to continue to get by, paying their rent and feeding their families. However, with unemployment remaining at record highs and stimulus packages beginning to be phased out, key decisions need to be made in regard to getting the economy back on track. While such discussions at the national level are underway, little support has been extended to the local level. Instead, many local governments are having to be creative about putting in place proper measures to allow businesses to reopen while also promoting safe social distancing. To assist local governments in their efforts to adjust to the new normal, we at Economic Pulse have put together a ‘5-Point Roadmap for Getting Local Economies Back on Track’.
1. Conduct a post-mortem of the economic and health impact of CoVID-19 on the local economy
In Canada, quick action to lockdown the country has meant that the rate of infection has been limited. However, with businesses shutdown early, the economic impact has been significant. Between February, before lockdown measures were put in place, and May which is considered the peak of lockdown, Canada’s unemployment levels climbed from 5.6 percent to 13.7 percent; they have since come down to 8.5 percent as of November. While public health officials and labor economists at the national level have begun to piece together a picture of the impact of the global pandemic and the subsequent lockdown, a lack of data at the local level has made it difficult to diagnose the impact on local economies. What we do know, however, is that the economic and health impacts of CoVID-19 have not unfolded evenly. While much of this has to do with the unpredictable nature of infection and its further transmission through personal contact, factors such as population size, density, and age structure of communities all provide important information for limiting the spread of the virus and reducing overall death rates. As communities prepare for what could potentially be a second wave of the virus, it will be important for local administrations to conduct a post-mortem on the economic and health impact of CoVID-19 on the local economy. This will help to reveal fault lines and important vulnerabilities that could potentially be safeguarded against should the worst of the virus yet to pass.
Action: Local governments should establish a committee to assess and quantify the local level impact, identifying vulnerable sectors, demographics and social groups. Such a postmortem should include an examination of relevant trends (pre-lockdown and post-lockdown) and a round of detailed interviews among business owners, consumers, seniors and other relevant members of the community. This will serve as the basis for local level interventions.
2. Prepare an Economic Base Analysis to understand the composition of the economy and identify key leverage points
The composition of jobs in a local economy is important to its sustainability. As previously mentioned, at the peak of the CoVID-19 lockdown, unemployment rose to 13.7 percent. Given that different sectors were hit harder than others, the impact would have varied by community. For example, Accommodation and Food Services was the hardest hit sector, experiencing a 50 percent reduction in employment. Whereas sectors such as Public Administration only experienced a 3 percent decline in jobs during the lockdown. Local economies that are heavily invested in tourism would have undoubtedly been hit harder than more diversified communities. Identifying strategic leverage points will be the key to getting local economies back on track. One such example can be found in employment multipliers. Counter to prevailing views, not all jobs are created equally. By some estimates, jobs in the tech sector, for example, are estimated to have a multiplier of 4, meaning that for every 1 job created in the tech sector, 3 other jobs are created to support this – this includes anything from baristas, to lawyers and grocers. This contrasts to other job types that have lower multipliers and lower spillover effects. It is worth noting, however, that multiplier effects vary significantly by region, so multipliers calculated in one region should not be applied in another. Another example is in recognizing strategic revenue sources for a community. Retirees, while often overlooked when it comes to economic development, have proven to be an important stabilizing factor for local economies during the CoVID-19 pandemic. Through their government and corporate pension cheques, they are continuously infusing new/external money into the local economy. This provides a local economic boost, as opposed to having internal capital recirculated. Such an understanding of strategic leverage points will prove to be important when it comes to getting local economies back on track.
Action: Local administrations should commission an Economic Base Analysis to reveal the composition of its economy and strategic investments that will help get it back on track. By understanding the economic base of a local economy, administrations can diversify their communities and leverage strategic opportunities to help them rebound faster; ultimately making their economies more resilient and robust in the long-run.
3. Retrofit the community to prepare society for the ‘new-normal’
With social distancing, the rise of masks and hand sanitizing stations becoming the ‘new normal’, there are many features of the CoVID-19 recovery that will likely become permanent installations in our communities; at least for the medium-term. While businesses will have to respond to these new requirements in creative ways, local administration can create a supportive framework for doing so. For example, with local restaurants, pubs and cafes only able to operate at reduced capacity, local administrations need to explore options for extending outdoor seating to at least make it economically viable for these businesses to continue operating. Similarly, as waiting rooms and lobbies remain closed, line-ups are having to form outside of banks and dental offices, leaving little space for pedestrians walking by. In some instances, sidewalks may need to be temporarily widened and opportunities to pedestrianize streets could help to make cities more livable and safer. Moreover, installing temporary and permanent seating and permitting the responsible consumption of alcohol in designated open public spaces, could also create an opportunity for customers to purchase meals and beverages for takeout and enjoy them in the comfort of the open air.
Action: Local administrations should establish a committee consisting of urban planners/designers, public health officials and business owners to identify interventions to retrofit communities for the ‘new normal’. Tactical urbanism and semi-permanent installations can play an important role here.
4. Strategically Identify and leverage emerging opportunities
Local economies are always in a state of transition. As local administrations work to get their economies back on track, new opportunities will present themselves. Those that embrace and leverage emerging opportunities will stand a better chance at getting their economies back on track. One such opportunity presented in the post-CoVID-19 world will be built around the idea of remote working. While this was a growing trend prior to CoVID-19, this forced experiment has served as an important litmus test for corporate leaders that were reluctant to explore remote working due to a fear of productivity loss. With a large percentage of the workforce now working from home, corporate leaders are seeing value in the form of savings that accrue from a reduction in the need for expensive commercial real estate. This might not work for all professions or organizations, but for many, productivity levels have maintained (and some have even increased) with the majority of their workforce working from home. The flexibility offered by such opportunities may encourage some households to relocate to more affordable communities that offer a better quality of life. This will present an opportunity for some communities to attract new residents. To achieve this, however, communities will have to demonstrate their attractiveness, showcasing improved quality of life and strong remote working infrastructure. Examples of the latter include widespread broadband connectivity, easy access to airports, and flexible workspace such as cafes, shared offices and larger homes with additional rooms. With international airport terminals remaining dormant, another emerging opportunity for communities can be found in the growth of domestic tourism. With a population growing restless from being cooped up for too long, many will decide to explore the domestic landscape. This will include both urban attractions such as museums and galleries as well as more remote settings such as camping and skiing. To take advantage of this emerging trend, communities will have to demonstrate their attractiveness, marketing their assets to a new clientele. Measures will need to be put in place to secure that activities can occur while upholding safe social distancing.
Action: Local administrations should put together a committee that can explore emerging opportunities and put in motion the necessary changes. This will involve establishing creative partnerships with local businesses, construction and real estate companies and other regional authorities to explore new opportunities. Building compelling communication and marketing campaigns will be central to attracting a new clientele during such transformative times.
5. Protect the social fabric of our communities
Communities are made up of distinct social groups that add to the social fabric of a place. This might be iconic businesses that contribute to the tourist landscape, sports or recreational organizations that add a sense of pride to the community or even arts and cultural events that protect traditions and establish a sense of cultural association (think festivals, heritage museums, or local performers). These groups add value and contribute to the social identity of a community. Such amenity benefits, however, are often not quantified and rely on the good patronage of the community. With lockdown effects preventing us from enjoying these amenity benefits, they become an afterthought when it comes to local recovery. Also, with many of us having to tighten our belts due to the struggling economy, many of these groups are not receiving the much-needed funds that would have otherwise contributed to their existence. The concern is that after CoVID-19 is dealt with and economies begin to open up, many of these iconic businesses, social groups and organizations will no longer exist. Social fabric is not something that is easily established, therefore local administrations should do what they can to prevent the damage from occurring in the first place. Those that continue to nurture and care for their communities, will stand to benefit when it comes to getting their economies back on track. It is therefore important that local administrations do what they can to protect the social fabric of their communities.
Action: Local administrations should assemble a reference group to identify the businesses, organizations and activities that are at risk of disappearing should lockdown measures remain in place. Through regular consultations, they can identify the needs of these different groups and put the proper measures in place to help them weather the storm. Creating outdoor performance space that promotes entertainment and the performing arts could be a way of building community cohesion while getting people out in a safe place that is conducive to social distancing.
Kyle Farrell is Managing Partner and Chief Urban Economist at Economic Pulse Analytics. He works closely with local governments to provide them with population, housing and employment forecasts to make more informed decisions about their future. He holds a PhD with specialized knowledge in Urban Economics and regularly consults for the United Nations.
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