Examining the NZ industries hit hardest by the COVID-19 pandemic
The COVID-19 pandemic continues to cause economic disruption at a scale not experienced since the 1930s Great Depression. With businesses struggling to survive, many workers will find themselves out of work, and the unemployment rate is set to rise to multi-decade highs of around 10%. In this article, we explore what industries are set to see the largest declines in employment across New Zealand over the next year.
The estimates outlined in this article represent our current expectations of how COVID-19 will affect the economy, but we continue to update our assessments as conditions evolve.
A swift reversal of fortunes
Only a few months back we were marvelling at how broad-based economic and employment growth was across industry and regions. The 2019 Infometrics Regional Economic Profiles, released at the end of January 2020, showed that employment grew in 45 of the 54 industries that we monitor closely.
However, the COVID-19 pandemic and response will turn this growth upside down. The large decline in employment across the country will see no industries and regions escaping the hammer blow. In total, we expect more than 250,000 jobs to be lost over the next year, with tourism-related sectors set to be the worst-hit (see Chart 1).
Infometrics’ current estimates point towards more than 53,000 jobs in accommodation and food services that could be lost over the next year – a third of all jobs in this industry.
The industry has been kneecapped, with New Zealand’s borders closed and likely to remain shut until either a vaccine is available or until the risk of reimporting new cases of COVID-19 from overseas has diminished. The hopes of the tourism industry will be on Kiwis looking to holiday locally rather than travelling overseas.
Discretionary spending will fall, taking jobs with it
The arts and recreation sector will get a triple whammy. The sector relies on discretionary spending, which will be slashed as people face gloomy job prospects and tighten their belts. Spending in the sector from overseas tourists will all but dry up. Furthermore, consumer behaviour will change, and cultural and sporting event goers will be reluctant to attend events with large gatherings of people, especially indoors. We expect more than 9,000 creative jobs to be lost.
Some industries will boom during lockdown but be hit hard on the other side. As people have been stuck at home and relied heavily on the internet for communication and home-based working, internet usage has soared by nearly 20%. But as we move out of lockdown and business failures mount, we expect to see a decline in internet usage, with internet and telecommunications companies facing the need to shed staff. Supermarkets will experience a similar boom during the lockdown but will face hard times following widespread job losses and general household belt tightening.
International education drop will hit job numbers
The international education sector accounted for 32,000 filled jobs, both directly and indirectly, in New Zealand in 2016 according to Infometrics analysis. We expect that this contribution will be halved by the effects of COVID-19. The hit will be concentrated in the main centres, with almost half of the total loss expected in Auckland. But there are also some smaller regions where significant numbers of international students make a sizeable contribution to local economy. International education contributes about 2% of Dunedin’s economy, and around 1.1% of Queenstown’s.
No sector will be spared
Ironically, even the health care industry is unlikely to go unscathed, with demand for certain private health services expected to decline. In tough economic times visits to health care professionals, such as a visit to the dentist or a physiotherapy session, will be pushed out until better economic times. Having fewer international students in New Zealand will also decrease demand.
It is clear that New Zealand is in for a rough ride as the economy adjusts to the enormous economic shocks currently underway. The scale of job losses is set to create structural changes in the economy, alongside the reallocation of workers and funds into other areas as New Zealand recovers. Although job losses will be severe, the changes to the economy will also open up new opportunities going forward, and the innovation this brings will see a pivot in how the New Zealand economy operates for years to come.
