Employment in hard hit sectors will need years to recover

A new report reveals that Covid-19’s impact on the job market is going to be severe. The impact will differ considerably by industry, and the hardest hit sectors won’t see their employment recover for years.

Latest date from the Australian Bureau of Statistics (ABS) shows that nearly a million jobs have been lost across Australia since the start of the pandemic, despite a massive economic recovery package (including a wage subsidy scheme) to the tune of $130 billion introduced by the government.

Predictions from Deloitte Access Economics reveal that not only will the impact on jobs be devastating across the country, the impact will also be inequitable in its impact, with some sectors forced to take a more than proportional hit.

For instance, as the lockdown has driven many Australians to change their lifestyle and consumption patterns, sectors such as food, retail, travel, entertainment and education, among others, have taken the brunt of the economic impact.

Some sectors such as retail, hospitality and entertainment have also been affected by virtue of being “on the wrong side of a fear factor,” according to Deloitte Access Economics, as they rely on extensive face-to-face interaction.

Underlying these sectors and all others is the significant job losses from businesses that simply do not have the cash reserves to cope with the plethora of disruptive factors thrown up by Covid-19.

Australia’s brick & mortar retail sector was already suffering from dwindling revenues, and the complete disappearance of footfall will undoubtedly have forced many into cutting jobs. However, such a scenario is likely to replicate itself with cash-strapped businesses now surfacing across the country.

The economic outlook as a whole has been bleak during the crisis, although the gradual easing of lockdown in Australia and in other economies has turned collective attention to an economic recovery plan. “There’s a timeline to recovery, but it’s a long one” – states Deloitte Access Economics in its analysis.

Broadly, the economics consultancy, part of Deloitte, reports that the sectors worst affected by the current crisis are the ones that will take the longest to recover, with the expected timeline to recovery extending beyond half a decade in some cases. Some of the sectors with the longest recovery timelines include accommodation, travel, arts and recreation.

On the other hand, other sectors that are more central to broader business recovery such as property, professional services, education and telecom might be back on track by as early as 2022.

Financial services

The anomaly amid the scenario’s portrayed is the financial services sector, which is currently operating below par and is expected to continue this level of performance over an extended period of time.

“The financial services sector is part of the defence against the Covid-19 downturn, with many loans being deferred. But over time banks can expect to see a sharp rise in non-performing loans, while it may be some time before businesses are ready to invest again at significant scale, implying a sharp hit to credit demand,” explained the report.

In terms of the jobs market, this scenario is expected to have clear regional implications. With most finance jobs concentrated in Central Business Districts (CBDs) across Australia, these regions are likely to have a longer recovery timeline for employment numbers as the financial services sector remains under persistent strain.

The health sector, meanwhile, is left out of the analysis as the demand for labour is only increasing. Meanwhile, Deloitte Access Economics has dire predictions for mining, manufacturing and farming, stating that these sectors will never return to normal, “although that reflects longer term trends of declining employment.”

Zooming out of the jobs focus, the consultancy also predicts long-term changes in work structures. Working from home has been a temporary arrangement for many, but economic experts have pointed out how the new virtual way of working is making businesses aware of potentially unnecessary capital costs. Remote working and other digital methods that have emerged under Covid-19 might well be here to stay.

On the other hand, Deloitte points out that “businesses are unlikely to completely abandon the office,” particularly as the return from social distancing will make office interaction all the more energising.