Better than hoped

IN THIS ISSUE’S CFCRA COLUMN by Lee Senter, you will see jobs that once were left unfilled for lack of any candidates now have more applicants than can be easily reviewed. For the meanwhile, that means downward pressure on wages and a good pool of applicants. These people may not be interested in staying around as the economy returns, but the future is pretty foggy and they may find the job you have is better than the job they don’t.

Kerry Knudsen

The future is foggy for housing starts, as well. Bob Dugan, chief economics for the Canadian Mortgage Housing Corporation (CMHC), notes: “Following large declines in 2020, housing starts, sales and prices are expected to start to recover by mid-2021 as pandemic containment measures are lifted and economic conditions gradually improve. Sales and prices are likely to remain below their pre- COVID-19 levels by the end of our forecast horizon in 2022.” However, he goes on to say, “The precise timing and speed of the recovery is highly uncertain because the virus’s future path is not yet known.”

That’s true. However, we need to look back at the beginning of the pandemic. At that time, we were told that we needed to lock down the economy to avoid overburdening hospitals in the early stages. You will recall they called it “flattening the curve.”

As a business, you need to ask yourself whether the virus’s future path will or will not lead to another lockdown of the economy. Everybody has an opinion. Mine is that it will not, for several reasons.

 

First, our hospitals, the original reason for federal intervention, have not failed.

Second, data regarding the prevalence, spread and mortality of the virus are all over the place and are being manipulated. For example, some jurisdictions are reporting mortality as deaths FROM Covid-19, while other are reporting mortality as deaths WITH Covid-19. That is, somebody could die from an associated risk factor — diabetes, for example — and be listed as a Covid-19 death. This could cause over- or underreporting on both sides, the only point being that it appears reporting is not consistent across jurisdictions.

Third, different jurisdictions clearly have different results, even when their policies are similar. This points to more controversy and less fact. For example, between Canada and the U.S., the U.S. has a higher infection and mortality rate, yet we have (or had) similar policies. Part of this may be to testing rates, and part may be because Canada has relatively more space between people, even along our crowded southern border. This analogy carries across Canada between densely populated and lightly populated provinces.

Fourth, the U.S. appears at press time to be moving ahead with opening the country. It is said when the U.S. sneezes, Canada gets the flu. In this environment, it’s hard to argue that point. But if the U.S. economy opens, we will have a hard time sequestering, since we will be under extreme political, economic and social pressure to follow suit.

 

So we don’t know what the future holds, but many point to continued openings of businesses (those that remain) and the potential for pent-up demand.

And let’s not forget that pressure on Chinese imports from the U.S. started before the pandemic and has continued throughout.

The Mortgagebrokernews.ca site picks up on this theme of demand, citing weak housing starts as a threat to supply. That’s another way of saying there won’t be as good a supply of houses to buy, which will put upward, not downward, pressure on prices.

As we go to press on June 18, surveys out of B.C. show that brand values have dipped during Covid-19 when the brands could not keep up with supply. Given what’s happened with the big-box stores and supply, there is a chance floor covering suppliers that have a good inventory and supply chain can recover some of the consumer base. That, combined with frustrated customers dealing with digital customer service and shoddy mass-installation artists could have an additional positive effect for family businesses.

Cheap labour, pent-up demand, more expensive imports and failing consumer confidence in box stores may point to a better- than-hoped outlook for the next several months. This may be a time to consider increasing, not decreasing margins to make up for years of downward pressure and offshore undercutting. You’re worth it.

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