Janet Henry, Global Chief Economist, HSBC
A difficult job
The COVID-19 pandemic has produced unprecedented and unpredictable shifts in unemployment across the world, but the worst may not be over yet. It is vital for government support schemes to adapt, targeting help where it is needed most and reskilling people for the jobs of the future.
As weak demand continues, joblessness is likely to rise further in many countries. To date, governments have attempted to build an economic bridge over the worst of the outbreak, but how many of the jobs that have been ‘furloughed’ will actually still be there when life returns to normal and the assistance falls away?
Drawing on global PMI survey data and labour market releases, we can start to assess the sectors that were most affected by the social-distancing measures and those where there are signs of stabilisation. We can also look at some of the distinctions between developed and emerging markets.
“Support will need to be more flexible and targeted”
Job losses have been more evident in lower-skilled, lower-paying jobs, and they have disproportionately affected younger and female workers. In the US, 60 per cent of workers aged 18 to 24 and workers earning less than USD25,000 a year have seen some income loss since mid-March, compared with about 50 per cent of those aged 55 to 64 and only about 38 per cent of those earning more than USD100,000.
A few sectors took on new staff during the early stages of COVID-19, including supermarkets, delivery services, home improvement chains and types of healthcare. But hospitality, recreation, tourism and many areas of transportation have been badly affected by the social-distancing measures that have been put in place.
While in some places there are signs of improvement in these sectors as some of those made temporarily unemployed return to work, they remain far below pre-pandemic levels. The recovery in these could also be slow if consumers are still fearful of crowds in the early stages of opening up. They could even see further job losses once the furloughing schemes have come to an end or have become more selective in the sectors and companies they support.
Even as a recovery comes through, the economy is likely to remain below pre-pandemic levels for some time, so future job losses are likely to extend more to areas of professional and business services, so could increasingly weigh on middle-income workers too. Based on our GDP projections, most countries will be unable to prevent unemployment from ending next year much higher than pre-pandemic levels. According to Manpower, only 54 per cent of global employers expect to return hiring to pre-pandemic levels over the next year – creating a clear challenge to the labour market recovery.
This means policy will have to evolve. Government support measures initially needed to be economy-wide – covering pretty much all companies in all sectors, at least in most advanced economies. These measures will have to be scaled back as governments feel the fiscal pinch, and the next round of policy support will need to be more flexible and targeted, including towards reskilling.
Workers will have to seek new jobs to replace the ones that will disappear. In countries such as France, which has committed to extending short-shift schemes for up to another two years, the pace of this labour re-allocation is likely to be slower. This should imply a smaller short-term hit to incomes, and even jobs if multinational companies are more inclined to protect jobs in those countries where government support remains in place. But, over the medium to long term, this could potentially have a more negative impact on productivity and future potential growth.
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The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Janet Henry
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