Yukonomist: The K-shaped economic recovery and what Yukoners can do about it

Yukonomist Keith Halliday

It looks like COVID-19 will play the role of Grinch this holiday season in the Yukon. But while the Grinch stole Christmas from everyone in Whoville, even adorable little Cindy Lou Who, it looks like the pandemic will be selective in its malice.

You may have loved ones locked down in faraway places like Toronto, unable to travel to the Yukon for the holidays. Your elderly neighbour may not be able to see the grandkids in case they picked up the infection at school or their jobs. Some of your friends may see their hours cut at work as cases rise over the next few weeks, even as holiday and winter heating bills pile up. Your favourite small business may see customers and revenue slow to a trickle.

Back in March, economists debated whether the recovery would be V-shaped, U-shaped or L-shaped. V-shaped meant Gross Domestic Product would fall vertiginously and then bounce back equally quickly. U-shaped meant more time bouncing along the bottom of the trough until recovery. And L-shaped meant economic output would fall, and then stay low for a long time.

Now, econo-pundits are talking about a K-shaped recovery. Part of the economy is recovering well, or is even at higher levels than before the pandemic. That’s the stroke of the K headed to the upper right.

Others are on the stroke of the K headed down.

The K-shape appears in many places. Central bank interventions have been so effective that interest rates are at record lows. This is good news for people with mortgages and stock portfolios, or companies with a lot of debt. Someone who had the cash to invest in their retirement plan back in January, say a popular S&P 500 index fund, would actually be up over 10 percent so far this year despite the pandemic.

If you are retired and relying on interest from your savings for cash, low interest rates are not good. Ditto for charitable foundations or First Nations settlement funds.

There are K-shaped trends in jobs too. Some Yukoners with secure jobs have continued to collect paycheques throughout the pandemic. Many may even have saved money. One big bank estimates Canadians are sitting on $90 billion more cash than normal thanks to reduced spending during the pandemic.

Meanwhile, the October Labour Force Survey showed there were still 188,000 fewer jobs in accommodation and food services across Canada. Construction, trade, personal services and culture jobs were also still down.

In September, employment for those in lower wage bands was still hardest hit, down more than a fifth. Meanwhile, some higher wage bands were back to normal or even higher.

K-shaped unfairness is also visible in the small business world. In September, retail sales in Canada were actually higher than before the pandemic. E-commerce sales were up 74 percent compared to a year earlier, which is great news for Outside digital retail giants. We’ve seen surging demand leading to shortages and price hikes at stores for everything from plywood to bicycles to snowmobiles.

Meanwhile, sales are down sharply in other sectors. Clothing sales were down around 10 percent versus February, bad news for Main Street shops. Google mobility data as of last week shows that Canadians are visiting retail and recreation locations such as restaurants, malls and movie theatres about 25 percent less than before the pandemic.

This helps explain why more than a quarter of small business owners who responded to an October survey by the Canadian Federation of Independent Business (CFIB) said that their revenue was half or less than normal. One in six are actively considering bankruptcy or shutting down their businesses.

CFIB doesn’t break out that data for the Yukon, but Google does suck Yukoners’ movement data into its systems. Apparently, Yukoners are even more skittish of retail and recreation locations than Canadians overall. Our numbers are down 32 percent, despite suffering relatively less severe lockdown measures here than in some provinces.

This means the K-shaped split applies to Yukon businesses too. Some may be doing better than ever. Others are suffering existential challenges.

It’s a reminder that this holiday season will be tougher on a lot of our fellow Yukoners than usual. Those more fortunate should keep this in mind.

We should all reach out to show some COVID-safe fellowship to our neighbours. When shopping for gifts this season, remember that workers and owners at many businesses around the Yukon are about to go through a very dark holiday season. Especially restaurants and services businesses. And charities are working hard to provide support services with more demand and smaller budgets. If you are one of those who has a small sliver of that extra $90 billion in your bank account, see if you can spend locally rather than on Amazon.ca this holiday season.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist and received the bronze for Outstanding Columnist in the 2019 Canadian Community Newspaper Awards.


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