REOPENING CANADA: A special report on the reawakening economy
To keep momentum going, we must resist the urge to retreat
“We survived.”
Chrissy Durcak, chief executive and founder of Montreal-based Dispatch Coffee, was talking about her company, but she could have been talking about the broader economy, too.
In April, the COVID-19 crisis was so terrible that the Bank of Canada couldn’t rule out the possibility that we were in the early stages of a depression. While not its base case, the central bank said the damage from an extended lockdown could be so great that “future growth would be severely dampened, with economic activity remaining below its prepandemic level for an extended period.”
We appear to have avoided the worst-case scenario.
The hundreds of billions of dollars that the central bank and the federal government pumped — and continue to pump — into the economy produced a bottom. Employers created more than 290,000 jobs in May, the biggest increase in records that date to the mid-1970s. The recession was brutal, but short.
Now, as social-distancing requirements are relaxed and more businesses across the country begin to reopen, the focus has turned to the recovery.
The glum outlooks from some observers are based on the assumption that elevated levels of unemployment, fear of catching the virus that causes COVID-19, and behavioural changes related to social distancing will combine to constrain demand.
But we humans have a tendency to surprise. The SARS outbreak in 2003 didn’t hurt as much as economists thought it would at the time, nor did the 9/11 terrorist attacks precipitate the economic calamity that many predicted in the immediate aftermath. Each time, entrepreneurs and executives found ways to adapt to new circumstances, and households proved their enduring commitment to spend once the initial shock wore off.
“I do think that we will recover,” said Corey Gross, chief executive and co-founder of Sensibill Inc., a Toronto-based technology outfit that uses artificial intelligence to process receipts.
“Do I think it will be as sharp a recovery as it was a decline? No. But I also don’t think it will be a slow, drawnout recovery. People want to get back to work. People want to reopen.”
The initial phase of the recovery from the COVID-19 crisis will look impressive on paper because restaurants, gyms and other businesses that were shut will reopen and workers who were on furlough will come off the unemployment rolls. It’s mechanical.
In March, Durcak closed her three cafes and fired all but five of her staff of 30.
Then she got a $40,000 emergency loan from the federal government’s smallbusiness rescue and
“doubled down” on
Dispatch’s delivery business. After orders picked up, she applied for the federal wage subsidy, which allowed her to bring back eight of the workers she had let go.
But the decision whether to rehire the other dozen baristas will depend to some degree on the willingness of Montrealers to line up for fancy takeout coffee.
In that sense, the pace of the recovery to a large degree will depend on us. The Great Depression was worsened by millions of people who had jobs behaving as if they did not, saving every penny.
The Great Recession persisted because policymakers were hesitant, in part because they were worried about how multibillion-dollar rescues and bailouts would be perceived by voters. If we avoid those mistakes, we should be able to keep the momentum of the reopening going.
That means those of us with money to spend and invest must resist the urge to retreat from the pandemic. And it means that governments must resist the urge to backtrack on their rescue programs too quickly.
Durcak attributes Dispatch’s survival to “good fortune.”
After you hear the rest of her story, you might call it something else.
Durcak started a subscription-based delivery business in February 2019, partly as a passion project, but also because she observed that commerce was moving to the internet and she wanted to catch the wave.
At the start of 2020, delivery represented about five per cent Dispatch’s revenue. With the cafes closed, it was suddenly all the company had. Her bet paid off and the delivery business blew up: Online sales increased 300 per cent in two months and now represent 90 per cent of sales.
Dispatch is making as much money as it was before the crisis, albeit with fewer people.
The revenue will give Durcak some breathing room to rethink the café business.
Currently, the rent is too steep for a world in which social distancing is the norm, but a constellation of smaller outlets could work. Maybe.
“I’m wary, but I’m also optimistic,” Durcak said.
“Fundamentally, humans are scrappy and resourceful when faced with crises.”