Covid-19 pandemic’s economic damage is growing

It will take years for the global economy to recover from the jobs taken away by the pandemic, and in Europe, the recession will be significantly deeper than forecast just two months ago.

Those were the findings Tuesday from two reports, from the Organization for Economic Cooperation and Development and the European Commission, that provided the latest readings on how widespread and deep the economic effects of the coronavirus will be.

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The OECD looked at jobs; the commission measured economic contraction. Experts conceded that the spread of the virus was unpredictable, making forecasts tenuous. But both reached similarly brutal conclusions.

The number of job losses has been 10 times greater than the hit inflicted during first months of 2008 global financial crisis, OECD economists said, making it unlikely that employment in Europe, the United States and other developed economies will return to pre-pandemic levels before 2022 at the earliest.

“In a matter of a few months, the Covid-19 crisis wiped out all improvements in the labour market made since the end of the 2008 financial crisis,” said Stefano Scarpetta, the OECD’s director of employment, labour and social affairs.

Joblessness in the 37 countries that are OECD members is expected to reach 9.7% at the end of the year from 5.3% in 2019 and could march to more than 12% should a second wave of virus force countries to shutter parts of their economies again.

Despite the virus’s broad sweep, the economic impact is affecting parts of society differently, and “the jobs crisis risks turning into a social crisis,” the report said. Lockdowns and business closures have hit the most vulnerable workers especially hard, and they are the ones who will have the toughest time finding new jobs or regaining lost income.

Top-earning employees were on average 50% more likely to work from home than people in low-income jobs, who are more often employed in essential services and at risk of being exposed to the virus while working, the study found.

Working from home will continue to be an option for many office employees, but the same opportunity isn’t available to front-line workers, leaving them at greater risk of job loss.

Women have been affected more adversely than men, the study found. They make up most of the workforce in heavily affected sectors, including health care and retail, and disproportionally hold less secure jobs. Women’s unpaid work burdens were amplified by widespread closings of schools and child care facilities, OECD researchers found.

Self-employed workers and those on temporary or part-time contracts have also been exposed to steep income losses as employers drop their contracts to compensate for lost income.

And an entire generation of young people risks being left behind as employers halt hiring plans. Online job postings have fallen by more than half since lockdowns, and internships designed to give young people badly needed work experience have been cut back drastically, the organization said.

“This crisis will permanently change the world of work,” said Angel Gurría, secretary-general of the OECD, whose members include the United States, France and Germany. “It is widening the chasm that existed even before Covid-19 struck,” he said.

Among European Union countries, the economic devastation unleashed by the coronavirus this year will be even worse than previously predicted.

The European Commission, the bloc’s administrative branch, said the EU economy would shrink by 8.3% this year, a downgrade from predictions released in May that saw a 7.4% contraction. The smaller eurozone, the subgroup of 19 nations that share the common currency, will have it even worse, shrinking by 8.7% this year.

At stake is the economic health of the richest bloc of nations in the world, a key trading partner to the United States and home to one of the most important currencies in global trading and saving, the euro.

The data is especially grim for nations in the bloc’s southern rim, some of which were particularly pummeled by the virus. Italy, the EU’s third-largest economy, is set to shrink by 11.2%; Spain, the fourth-largest, is facing a 10.9% recession; France, second after Germany, will shrink by 10.6%.

The commission warned that these predictions were tenuous and assumed “that lockdown measures will continue to ease and there will not be a ‘second wave’ of infections.”

But forecasters noted that recovery was already underway in parts of the bloc.

“Early data for May and June suggest that the worst may have passed,” the commission said. “The recovery is expected to gain traction in the second half of the year, albeit remaining incomplete and uneven across member states.”

Both reports stressed the need for continued government intervention.

Next week, EU leaders are expected to meet in person for the first time in months to try to hammer out a compromise on a 750 billion-euro ($855 billion) fund that will inject money into member states’ economies in a bid to prop up their recoveries.

Paolo Gentiloni, the EU’s economic commissioner, said in a statement that while European governments have worked to cushion the blow of the pandemic, “this remains a story of increasing divergence, inequality and insecurity.” He added that it was important “to reach a swift agreement on the recovery plan.”

The OECD noted that many countries have responded by providing financial support to companies and strengthening or extending income support to people unable to work or who are jobless.

Those safety nets must remain in place, it said, as the virus continues to pose a threat to a global economic recovery.