Decentralized economy and diverging paths: Canada in 2021

By: via PR Newswire

RBC Economics presents 21 charts reshaping Canadian life in a post-COVID world

TORONTO, Dec. 9, 2020 /CNW/ - Canadians are entering a new year, and in many cases, a very different world, in 2021.

We are shopping online like never before and spending more time in our gardens and less time on the road. Many have packed up their bags, and moved to the country given that remote work is loosening ties to more expensive city life.

Troubling trends have also emerged. Long-term unemployment in Canada surged 250 per cent during the health and economic crisis, which makes it a lot harder for those impacted to get back into the workforce. The pandemic has been especially hard for those at the bottom end of the wage scale, earning less than $800 a week. Women have also been disproportionally impacted.

A new era of decentralization
Many of the forces reshaping Canadian life are underpinned by an increasingly decentralized economy.

"Just as the 20th century was built on the backs of centralization, through office towers, shopping malls and hospitals, the 2020s is starting to look like a new era of decentralization, built on the backs of digital platforms. The convenience is extraordinary. So too may be the consequences," according to John Stackhouse, Senior Vice-President at RBC.

A new report from RBC Economics explores this transformation and how it may influence consumers, business and policy makers in the coming year. Some sectors are already accelerating into a new period of growth and innovation; others are discovering their legacy models may not get another chance.

Fork in the road
The same diversions are also happening in the labour market. Those able to seize on the redistribution of economic activity are thriving. Others will need new skills, new sectors or new kinds of government support.

For instance, the COVID crisis has triggered some of the most unequal consequences for Canadian workers of any recession. Those at the bottom end of the wage scale, earning less than $800 a week, have absorbed sizeable job cuts. Higher earners have seen their employment opportunities improve during the downturn.

"Some of those who have lost their jobs will opt to go back to school or retrain, but those who could benefit most from upskilling have historically been the least likely to do so. Without a strategy to get lower-wage workers back on the job, the uneven damage of the recession could turn into an uneven recovery," said Stackhouse.

Provinces are also on diverging paths according to RBC Economics. They were already carrying debt-to-GDP ratios at levels not seen since the 1990s. The pandemic added ballooning healthcare costs to their burdens.

"2021 will be a high-water mark in terms of deficits across provinces, and some of the increase in health expenditures will be temporary. Provinces in better financial shape will regain breathing room as the pandemic subsides. But those in the most precarious fiscal shape will face greater challenges. Expect calls for greater permanent fiscal transfers from the federal government," said Craig Wright, Chief Economist, RBC.

The needle and the damage done
Broad availability of a COVID-19 vaccine would provide a shot in the arm to Canadian growth in 2021. But even then, GDP won't bounce back to previously forecasted levels until at least 2022.

"Given that we're in for a period of extended economic pain, continuing fiscal and monetary stimulus remain essential. By extending income supports, Ottawa can help the hardest-hit workers get through the crisis, and create a supportive environment for business owners upended by virus-control measures. For all policymakers, limiting the pandemic's potentially lasting damage—to labour markets, Canadian living standards, and potential growth—will be imperative," said Wright.

Areas of focus cited by RBC Economics include the need to:

  • Address long-term unemployment in sectors reliant on the close proximity of people.
  • Transform skills programs so less-educated service workers are ready for a digitally-driven economy.
  • Assist businesses and communities to build the digital infrastructure and skills needed to thrive in a platform-based economy.
  • Redesign cities, towns and communities to absorb and support a redistributed workforce.

"The pandemic has accelerated us toward a future RBC long anticipated. But it has also exacerbated many of the challenges facing our society," said Stackhouse. "A key aim of this report is to provide Canadians with insights about our collective future, and how they may successfully navigate the year ahead."

About RBC
Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading performance. Our success comes from the 86,000+ employees who leverage their imaginations and insights to bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada's biggest bank, and one of the largest in the world based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our 17 million clients in Canada, the U.S. and 34 other countries. Learn more at rbc.com.‎

We are proud to support a broad range of community initiatives through donations, community investments and employee volunteer activities. See how at rbc.com/community-social-impact.

SOURCE RBC

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