The world is facing its second economic downturn in just over a decade and amongst the measures to help the economy recovery our government have placed the employment of young people at the heart of its recovery plan.
The recently announced “Kick Start Scheme” seems like an attempt to stop another generation of “crisis cohort”. When the financial bubble burst back in 2008 it was Millenials graduating between 2006-2012 that were the hardest hit in the job market. They were left less likely to find full-time jobs and were also left less likely to be able to save for their own homes and retirements. The property market has also grown disproportionately to wages.
When I heard the Chancellor, Rishi Sunak, unveil the details of his Kickstart scheme specifically aimed at workers between the ages of 16-to-24 years old I felt a sense of relief. Having graduated in the years surrounding the 2008 financial crisis I felt as though the government was drawing on the collective experience of my generation to better prepare Generation Z and beyond for their future. It was refreshing to see young people pushed to the forefront of the recovery scheme.
Despite the protection the government is attempting to offer young workers it’s undeniable that the Covid-19 global pandemic will have far reaching and long-lasting impacts on each countries economy individually and the global economy as a collective.
The International Monetary Fund’s latest forecasts predicts that the global GPD could fall 3% in 2020 compared to a 0.1% decline in 2009. If this comes to fruition it will become the worst economic crisis since the 1929 Great Depression.
Where 2008 is now viewed as a bubble that burst 2020 will be viewed as the year the economic brakes were slammed on.
“I feel like the 2008 financial crisis was just a dry run for this,” said Kenneth S.Rogoff, a Harvard economist and co-author of a history of financial crises, ‘This Time Is Different: Eight Centuries of Financial Folly.’
“This is already shaping up as the deepest dive on record for the global economy for over 100 years,” he said. “Everything depends on how long it lasts, but if this goes on for a long time, it’s certainly going to be the mother of all financial crises.”
It’s not all bad news however, given that the pandemic is an unprecedented event it’s almost impossible to safely forecast the true impact it will have on the world. What we can do is look at current consumer trends to try and build ourselves back up to where we once were.
The latest data from the Office of National Statistics (ONS) published on the 12th of July 2020 showed that consumers on the whole are less likely to plan a holiday abroad this summer with 81% of respondents listing this as being unlikely or very unlikely. This could lead to a mini-boom in our home grown economy as consumers move towards local offers or days out to entertain themselves in the school holidays. 45% of people polled stated that they felt comfortable or very comfortable eating outdoors at a restaurant since the country began to open up. As people become more confident in the establishments around them, take stock of the safety measures put in place and grow used to socialising again I’d hope to see a rise in the number of people who feel just as comfortable eating indoors as they do out. However I wouldn’t predict a quick change in consumers behaviour because as Charles Dumas, chief economist at TS Lombard an investment research firm in London, stated:
“The psychology won’t just bounce back, people have had a real shock. The recovery will be slow, and certain behavior patterns are going to change, if not forever at least for a long while.”
Also another positive that could help both the UK & the world’s economy bounce back from the pandemic is the fact that the economy overall was stronger at the beginning of 2020 than it was at the start of 2008 thanks in part to stress testing measures and more sensible lending that were introduced in financial establishments off the back of the 2008 crash.
Javier Niederleytner, Professor for the Institute of Stock Exchange Studies (IEB), “Central banks have acted quickly, the impact has not been as great because the origin of the crisis is non-financial. The crisis is hardly lacking in money. What needs to be done is to orchestrate how this money can reach the sectors in need, consumers, etc. The underlying problem in 2008 was that the money wasn’t there because of overarching distrust of the financial system. Now the problem is that we don’t know when the pandemic will be over.”
All in all no matter how you paint the situation the next year or maybe even two is going to be full of economic ups and downs both for consumers and businesses. I for one am just thankful that Rishi Sunak recognises the hard hitting effect the 2008 crisis had on young people and the opportunities afforded to them and has done all in his power to try and prevent another crisis generation.