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Technology, whether in the form of automation or digitalization, has surged during the health crisis. Anthony Okolie speaks with Sri Thanabalasingam, Senior Economist, TD Bank, about the adoption of technology and its impact on the labour market recovery.
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- Sri, in your latest report, you talk about digital transformation. Specifically the rise and the use of technology by both households and companies that helped our economy rebound over the past year. Now the clearest example that you point out to is, of course, online shopping. So tell us a little bit about that.
- That's right, Anthony. Online shopping really took off during the pandemic. People were working from home, as well as they were restrictions in terms of in-person shopping. So they turned to virtual platforms to fulfill their demand.
And so we saw e-commerce sales really take off. And right now, it's standing 100% above where it was prior to the pandemic. So this digital transformation we really saw through the online shopping route.
And one important point here is that it may not have occurred if businesses didn't take undertake investments to build out their virtual platforms. So this occurred as well. And so this is why we're seeing that digital transformation really accelerated during the pandemic and this allowed the economy to be more resilient to the pandemic and associated restrictions.
- Now, of course, the flip side of tech adoption is potential job losses. What are some of the occupations that are facing the biggest risks right now?
- That's right. Unfortunately, some jobs may not come back as we think about the recovery. Statistics Canada, in a report released last year, showed that consumer representative jobs-- so that's your retail trade, wholesale trade, salesperson-- these jobs are at higher risk of job transformation, as they call it, due to digitalization.
And so when we think about the recovery, and the fact that more people are doing online shopping, and a lot more business transactions are occurring virtually, there may be less need for some of these jobs. And unfortunately, these were areas that were the hardest hit by the pandemic.
- And what occupations are likely to see higher demand from digital transformation?
- Right. And so as some jobs disappear, others will appear. So when we think about retail trade, for example, and the fact that more people are doing online shopping, that may mean that there's greater demand for warehouse workers. And on top of this, because we are in this digital transformation, there's a greater need for people with digital skills as well.
And then even within occupations. For example, office building maintenance staff. There may be less need for them. But because more people are working from home, there may be greater need for housekeepers. And so this transformation will likely occur as we emerge out of the pandemic.
- OK. So given this digital transformation, what's your near- and long-term outlook for the labor market recovery as the economy continues to reopen?
- So we do expect a pretty strong recovery in the near term for employment. There could be some challenges because this labor reallocation shock could weigh on the recovery in the near term. So we might not see us getting back to pre-pandemic levels in July or August. But we expect it to occur sometime during the fall.
Now, over the longer term, as more people shift to new occupations, we do expect the unemployment rate to get back to pre-pandemic norms by the end of 2022.
- OK. So given this outlook, what are the risks over the near term and long term to your outlook?
- So there are risks because there are a lot of people who are still unemployed. And they've been unemployed for a very long time. And so that level is elevated.
And with being unemployed for so long, it could lead to a deterioration of your skills. And some of these people, because their old jobs aren't there, they might have to learn new skills like digital skills, for example. And that could take some time.
And so for them to then find new work, if it takes longer than what we currently expect, then the unemployment rate itself could be elevated for longer as well. And then this scenario, it may only get back to pre-pandemic norms by 2023.
- Sri, thank you very much for your insights.
- Thank you, Anthony.
[MUSIC PLAYING]
- That's right, Anthony. Online shopping really took off during the pandemic. People were working from home, as well as they were restrictions in terms of in-person shopping. So they turned to virtual platforms to fulfill their demand.
And so we saw e-commerce sales really take off. And right now, it's standing 100% above where it was prior to the pandemic. So this digital transformation we really saw through the online shopping route.
And one important point here is that it may not have occurred if businesses didn't take undertake investments to build out their virtual platforms. So this occurred as well. And so this is why we're seeing that digital transformation really accelerated during the pandemic and this allowed the economy to be more resilient to the pandemic and associated restrictions.
- Now, of course, the flip side of tech adoption is potential job losses. What are some of the occupations that are facing the biggest risks right now?
- That's right. Unfortunately, some jobs may not come back as we think about the recovery. Statistics Canada, in a report released last year, showed that consumer representative jobs-- so that's your retail trade, wholesale trade, salesperson-- these jobs are at higher risk of job transformation, as they call it, due to digitalization.
And so when we think about the recovery, and the fact that more people are doing online shopping, and a lot more business transactions are occurring virtually, there may be less need for some of these jobs. And unfortunately, these were areas that were the hardest hit by the pandemic.
- And what occupations are likely to see higher demand from digital transformation?
- Right. And so as some jobs disappear, others will appear. So when we think about retail trade, for example, and the fact that more people are doing online shopping, that may mean that there's greater demand for warehouse workers. And on top of this, because we are in this digital transformation, there's a greater need for people with digital skills as well.
And then even within occupations. For example, office building maintenance staff. There may be less need for them. But because more people are working from home, there may be greater need for housekeepers. And so this transformation will likely occur as we emerge out of the pandemic.
- OK. So given this digital transformation, what's your near- and long-term outlook for the labor market recovery as the economy continues to reopen?
- So we do expect a pretty strong recovery in the near term for employment. There could be some challenges because this labor reallocation shock could weigh on the recovery in the near term. So we might not see us getting back to pre-pandemic levels in July or August. But we expect it to occur sometime during the fall.
Now, over the longer term, as more people shift to new occupations, we do expect the unemployment rate to get back to pre-pandemic norms by the end of 2022.
- OK. So given this outlook, what are the risks over the near term and long term to your outlook?
- So there are risks because there are a lot of people who are still unemployed. And they've been unemployed for a very long time. And so that level is elevated.
And with being unemployed for so long, it could lead to a deterioration of your skills. And some of these people, because their old jobs aren't there, they might have to learn new skills like digital skills, for example. And that could take some time.
And so for them to then find new work, if it takes longer than what we currently expect, then the unemployment rate itself could be elevated for longer as well. And then this scenario, it may only get back to pre-pandemic norms by 2023.
- Sri, thank you very much for your insights.
- Thank you, Anthony.
[MUSIC PLAYING]
