Nobody knows what will happen when Vancouver's economy reopens following the Great Suppression

For Vancouver businessman Brendan Ladner, this pandemic has been a real bummer. The 40-year-old CEO of SMAK Healthy Fast Food had to shut down all three of his downtown food outlets, lay off his staff, and figure out how to pay his rent.

Ladner and his 35-year-old wife, Amanda, have sons aged two and five, childcare bills, and a $4,400-per-month rent bill for their three-bedroom West End apartment.

The Canada Emergency Response Benefit pays him and his wife $3,400 per month, after deducting for tax.

“We are getting crushed,” Ladner told the Straight by phone.

He knows he’s not alone. According to his calculations, total rent deficits in Vancouver in May will exceed $22 million.

Ladner added that there are 131,000 rental housing units in the city, with young adults occupying 63.2 percent of them. And there are more than 250,000 rental units in Metro Vancouver.

He said that without a solution to the growing rental debt being created by the pandemic, any economic recovery will be delayed.

That’s because entrepreneurs tend to be younger adults who launch small businesses—and they’re being disproportionately clobbered right now.

“I hope that the policymakers really think about our youth and young adults, the future leaders of our society,” Ladner said. “Give them a chance to succeed here instead of burying them in debt and obligations.”

That’s why he thinks the time has come to cap rent at 30 percent of people’s incomes—and have the landlords and government sort out between them how to deal with what’s due beyond that.

To date, there’s no evidence that the province is prepared to go beyond $500 monthly subsidies and retaining a ban on evictions in addressing the rental conundrum.

That offers little comfort to those who, like the Ladner family, are paying more than $2,000 per month in rent in Vancouver.

Engineering controls and physical distancing will continue

On Wednesday (May 6), Premier John Horgan, Health Minister Adrian Dix, and the provincial health officer, Dr. Bonnie Henry, are scheduled to discuss how the B.C. economy will be gradually reopened after the COVID-19 lockdown is lifted.

But from an earlier briefings by Dix and Henry on May 4 and May 5, it was already clear that the B.C. government is in no mood to revert to the prepandemic status quo.

“If we go back to December, when we were having lots of gatherings where people met, this virus could take off quite rapidly,” Henry warned. “We could expect to see that.”

Instead, the health officer advocated for finding the “sweet spot, somewhere around increasing our contacts by at least half—or twice as many as we have now—but not allowing those opportunities for rapidly exponential growth of the virus in our communities”.

It’s clear that B.C. will not mimic Sweden, where bars, restaurants, and schools have remained open throughout the pandemic. There, the government is allowing its citizens to exercise “personal responsibility” in their actions. Sweden’s death rate from COVID-19 has been substantially higher than its Scandinavian neighbours, but it has also remained significantly lower than other European countries that imposed lockdowns, such as Spain, Italy, and France.

According to Henry and Dix, the public can expect continued physical distancing, as well as “engineering controls” in other parts of the economy, like the plexiglass barriers between cashiers and customers in grocery stores.

In addition, they left no doubt that some administrative controls would be needed, such as placing limits on the number of people in a building and putting markers on the floor to ensure people remain two metres apart.

On top of that, they said that personal protective equipment may need to be worn in workplaces.

In other words, if clothing stores and malls reopen, visiting them will resemble a trip to Shoppers Drug Mart today. In fact, Dix referred to physical distancing as “the public’s best friend”.

Most provinces started the process of reopening their economies even as Prime Minister Justin Trudeau was urging people to stay home. Manitoba, for example, has allowed hair salons to accept clients and restaurants to serve customers on patios.

Retailers can open shop in Quebec outside of Montreal. Ontario is allowing auto dealerships to meet customers by appointment only while permitting automatic car washes, marinas, golf courses, and seasonal businesses to open.

This month, Alberta is lifting restrictions on some retail and personal-services businesses while allowing restaurants and bars to operate at 50 percent capacity.

On May 5, Dix noted that many sectors were never halted in B.C., including gardening shops, construction, and resource extraction.

However, Bryan Yu, the Vancouver-based deputy chief economist of Central 1 credit union, said that B.C. has moved a bit more slowly than other provinces.

“I would expect as we move through May into June, we are going to see the economy recover,” he said. “But it’s going to be gradual.”

Voluntary shutdown causes economic contraction

In fact, Central 1 is forecasting a seven percent reduction in the B.C. gross domestic product in 2020, which would make this contraction even worse than the recession of 1982.

But because this has been a voluntary shutdown, Yu expects the recovery to occur more quickly than in previous slowdowns caused by macroeconomic factors.

Yu also pointed out that the impact of the lockdown was greater in Metro Vancouver, where there’s a strong tourism sector. But the damage hasn’t been restricted to accommodation and food services, which Central 1 expects to decline by 33.6 percent this year. That’s because the global economic slowdown has hurt trade and left a mark on industries like manufacturing, which is anticipated to contract by 8.7 percent.

“We’ve seen a number of technology companies here laying off workers,” Yu added. “Their fundamental business could be a reflection of the real economy, whether it’s delivery of food or making things easier for restaurants [that are now suffering].”

One tech company, Eventbrite, experienced significant cuts due to the reduction in public events. As a whole, professional, scientific, and technical services are forecast to decline by 6.8 percent.

And don’t think that everything is going to be hunky-dory at Rogers Arena or B.C. Place Stadium as the lockdown is lifted. In her briefing with reporters, Henry said that it’s conceivable that National Hockey League games could take place in Vancouver. The players could wear face shields to ensure there’s sufficient protection from the spread of COVID-19.

But Henry said she does not expect that there would be an “in-ice audience”. The games would merely be broadcast. That, of course, would deprive the Vancouver Canucks of the ticketing and food and beverage revenue that helps cover the players’ salaries.

If there are no live audiences for the Canucks, that pretty much rules out concerts and large sporting events at the province’s largest arenas and stadiums. It’s one reason why Central 1 has pegged arts, entertainment, and recreation to shrink by 20.7 percent this year.

“This will be a different summer than any of us has ever known,” Health Minister Dix told reporters. “But it can be a summer of renewal if we hold fast to the rules and guidelines Dr. Henry sets for us to reduce transmission, whether talking about industry sectors or our own behaviour.”

New home market linked to resale prices

The finance, insurance, and real-estate category is one of the province’s biggest economic generators. According to Central 1, it contributed $29.2 billion to B.C.’s gross domestic product last year. This year, that is expected to fall to $26.8 billion—a drop of 8.3 percent.

In a May 5 webinar, Rennie Group vice president of market intelligence Andrew Ramlo and senior economist Ryan Berlin characterized the current economic slowdown as “the Great Suppression” because it was done voluntarily by governments and businesses.

They called it one of three major downturns of the past century, the other two being the Great Depression of 1929 to 1933 and the Great Recession of 2008-09.

Job losses in Canada in March were eight times the number lost in 2008. This time, unlike in the Great Depression and Great Recession, 57 percent of them were part-time positions and 99 percent were on the services side of the economy.

Ramlo raised the possibility of deflation, where prices actually decline due to dampened consumer demand.

For his part, Berlin suggested that the presale market for new homes is inextricably linked to the resale market.

“This could go in a lot of different directions,” Berlin said, “and there’s a lot of time for a rebound.”

In the meantime, entrepreneurs are adapting as best they can.

One example is Joyce Yim, owner of the Passion Tearoom in downtown Vancouver. When she had to shut its doors due to COVID-19, she developed a home-delivery DIY bubble-tea kit.

She since sold 2,200 of them with help from her brother Joshua.

These bubble-tea kits and drinks recently became available on a takeout basis, with Yim and other families wearing masks and gloves when customers show up.

“They’re just picking up from outside the door,” Yim explained. “Nobody is allowed to enter the store.”

Yu, Ramlo, and Berlin were all cautious about making declarative statements about what’s going to happen in B.C. as the lockdown is lifted.

In the webinar, Berlin pointed out that even the governor of the Bank of Canada, Stephen Poloz, has been reluctant to make any predictions, given the unprecedented nature of this economic contraction.

“It’s been said—not by myself—that economic forecasting was invented to make astrology look good,” Berlin quipped. “But one thing I will say about British Columbia and Metro Vancouver in a relative sense: we had a very well-functioning economy.”