V U W L.....K?

The use of letters of the alphabet to describe the possible shape of the recovery phase of the pandemic is nothing new. The V-shape is Donald Trump's fever dream, and just for a while there it seemed possible that it might happen. Given the rebound that we have already seen, U and L -- denoting respectively a long spell of low activity before a gradual recovery, and a long spell of low activity with scarcely any rebound at all -- no longer seem to be in contention. Right now, with the second wave of the pandemic well under way in Canada and many other places, W seems like the likeliest prospect.  In this scenario the May-September bounce gives way to a renewed decline in activity as lockdown measures are tightened again, with a further sharp rebound in prospect as the second wave eases in a few months' time.

But what's this? On the CBC website, columnist Don Pittis is talking up the prospects for a K-shaped recovery.  His suggestion is that some segments of the economy will continue to see a strong rebound, while others will inexorably weaken. This is in effect a variant of the view that some sectors are temporarily weak because they have been intentionally "suppressed" by governments in an effort to control the virus, while others have been dealt a mortal blow that may take years to recover from, if indeed recovery is even possible.  

A closer read of Pittis's piece suggests that a K shape might be an oversimplification. His list of occupations that are likely to enjoy a steady rebound, including those able to work from home, retirees and people such as Amazon workers who provide services to those two groups, looks reasonable. However, his list of those facing long term decline is less certain.  Hospitality and restaurant workers may indeed suffer another blow as the second wave unfolds, but those sectors should bounce back to pre-COVID levels once the pandemic is really in the past. Boeing workers and those associated with the cruise ship sector? Not so much. 

As Pittis suggests, the Canadian employment data for September, due out on Friday, may give us some  indication of how all this is unfolding. With fresh lockdowns only now starting to bite, however, the October numbers will probably be even more revealing.