After the COVID-19 crisis we are going to see a rise in structural unemployment, efforts by companies to improve their financial situation and a contrast between difficulties for wage earners and the rising wealth of asset owners. The combination of these three developments could obviously trigger a social crisis, according to analysts at Natixis.
Key quotes
“The COVID-19 crisis will lead to a huge shift in the sectoral structure of economies. We are going to see sectors in permanent difficulty (automotive, aerospace, air transport, tourism, restaurants, culture, traditional retail, office real estate) and growing sectors (IT services, healthcare, pharmaceuticals, security, online retail). Jobs will therefore have to be transferred from the sectors in difficulty to the growing sectors. But this is difficult to achieve, as they require different skills. There is a risk that structural unemployment will rise sharply.”
“After the COVID-19 crisis, companies will have been hit by both a fall in their equity due to the fall in their earnings and an increase in their debt. Companies will therefore try to improve their balance sheets and lift their profitability, leading to a number of developments that may exacerbate social tensions: slowdown in wages, afresh wave of offshoring, the search for monopoly positions, calls for tax cuts (and the rejection of environmental standards. Capitalism therefore risks become ‘harsher’ after the COVID-19 crisis.”
“The economic policy response to the COVID-19 crisis has consisted in huge fiscal deficits monetised by central banks, which have kept long-term interest rates very low and brought about a huge expansion in liquidity. This monetary environment will lead to a sharp rise in asset prices (equities and real estate), especially once the uncertainty over the public health situation subsides. Public opinion will therefore see difficulties for wage earners on the one hand (rising unemployment and a slowdown in wages) and rising wealth on the other hand.”
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