Coronavirus sledgehammers global job markets

While the true extent of the economic damage caused by the COVID-19 outbreak is yet to be determined, what's certain is that the crisis will claim millions of jobs. But a handful of sectors may escape with minimal pain.

The International Labour Organization (ILO) has said the coronavirus outbreak could eradicate almost 25 million jobs worldwide, as the pandemic forces hundreds of millions of people to remain indoors, virtually shuttering the global economy. By comparison, the 2008-09 global financial crisis caused unemployment to rise by 22 million.

The UN body, however, said the job losses could be far lower at 5.3 million if the economic fallout from the virus is contained. The ILO also flagged a rise in underemployment and large income losses for workers to the tune of $3.4 trillion (€3.1 trillion), as the economic impact of the virus outbreak translates into reductions in working hours and wages.

"It's really a global crisis not just in terms of its outreach but also in terms of its economic impact, literally all sectors will be impacted," ILO's Dorothea Schmidt-Klau told DW. "The governments need to act at a large scale, and they need to act in a coordinated manner. So, there needs to be some policy coherence at the national level but also at the global level."

Even as global leaders discuss a coordinated response to the crisis and in the meantime respond with individual fiscal measures, companies around the world — already reeling from tariff wars and global economic slowdown over the past year — have begun issuing pink slips. Travel and tourism worst hit The airline companies — clobbered hardest by COVID-19 — have been among the first to get off the blocks as global travel bans to contain the virus force them to ground thousands of flights. Air Canada, Scandinavian Airlines and Norwegian Air have announced plans to collectively layoff more than 20,000 employees.

Experts warn of more job cuts, especially in the fragmented European market, which has long suffered from overcapacity and price wars. Airlines with weaker balance sheets could find it difficult to survive the pandemic and fold up just as British carrier Flybe did.

The hospitality industry is also struggling to cope with the sweeping containment measures. Marriot, the world's largest hotel company, and other major hotel chains such as Hilton and Hyatt are furloughing or terminating tens of thousands of jobs. In Europe, Scandic, Sweden's biggest hotel group, said it would issue termination notices to 2,000 Swedish workers.

"It's just the beginning, we could see huge manufacturing industries closing simply because they can't get the parts that they need within the global supply chain to produce what they are supposed to produce. So, we could see really big companies closing down," SchmidtKlau said. "Tourism might be the first one to be hit the hardest. But it's certainly not going to be the only one."

Ominous signs from the US The job market in the US — the third-most affected country behind China and Italy in terms of confirmed cases — is already showing ominous signs.

US jobless claims jumped 33% to 281,000 in the week ending March 14. Goldman Sachs economists say jobless claims may have soared to a record 2.25 million last week — that's more than triple the previous peak reached in 1982. The figures are due on Thursday.

Federal Reserve Bank of St. Louis President James Bullard predicted lockdowns to contain the virus may send the US unemployment rate soaring to 30% in the second quarter with an unprecedented 50% drop in gross domestic product, Bloomberg reported.

A Moody's Analytics' report showed that 27 million people, or about 18% percent of total US jobs, work for "industries whose revenues are severely curtailed, and are vulnerable to layoffs, as businesses, particularly smaller firms, run down their cash and credit lines." It named leisure and hospitality, transportation and employment services among the sectors most at risk. Health care and government sectors were among the least vulnerable.

The report said hiring had already fallen to levels seen during the height of the financial crisis.

Low oil prices, which have fallen to multiyear lows due to a fall in demand caused by the lockdowns and a price war between Saudi Arabia and Russia, could lead to further job losses in the US shale industry. Several shale producers have gone bankrupt in the past few years, unable to boost profits amid low oil prices.

German job losses

While economists diverge on the extent of the damage the coronavirus is likely to cause to the economy, given the uncertainty about the fallout from the virus, there is a broad consensus that the lockdowns and other emergency measures in major European economies such as Germany, Italy, France and Spain will drag the region into a recession.

Experts say the meltdown could eradicate millions of jobs across the region but the impact on each country would depend on how the individual governments respond to the crisis.

"Germany for example has its scheme where the government will subsidize a reduction in hours and so you could see probably a smaller rise in unemployment there than in other countries," Angel Talavera from Oxford Economics told DW. "In countries like Spain, which typically has a very reactive labor market, when the economy slows down sharply, you normally see a big hit to employment."

Germany's "Kurzarbeit" or short- time work program, launched to minimize layoffs during the 2008-09 financial crisis, allows companies facing economic distress to reduce working hours of their employees instead of firing them. The German government then provides workers with an allowance to partly make up for the lost wages.

German research institute ifo said the pandemic could eliminate as many as 1.4 million fulltime positions in the country and put more than 6 million employees on short-time work.

"The crisis is causing massive distortions in the labor market that are worse even than conditions at the height of the financial crisis," ifo President Clemens Fuest said.

Deutsche Bank economists said the euro area unemployment rate could jump to as much as 13-19% compared with a high of 12% seen following the global financial crisis.

Weather the storm

Experts say workers in a handful of sectors such as IT, health care, telecom, e-commerce and food retail are best placed to keep their jobs.

The Financial Timesreported last week that techcompanies were still hiring feverishly to gear up for a world shifting increasingly to digital as a result of the coronavirus.

In California, tech companies had 15,852 jobs open in the second week of March — down marginally from the week before and nearly three times the level from a year ago, the paper reported, citing data from employment marketplace ZipRecruiter.

Experts, however, caution that if the disruption caused by the virus were to last longer than six to 12 months, then even some of the likely winners could be hurt.

"The IT sector in the end of the day is a service sector and if there are no services to be provided, then of course there is no IT support needed," SchmidtKlau said. "As far as production of IT equipment is concerned, it is a very globalized sector. So, again if value chains and supply chains are interrupted this sector will suffer just as much as others."

hope to develop a vaccine by using mRNA [messenger ribonucleic acid] as a source of information. We'll shortly be able to launch clinical tests. I believe it's a very good substance class to get a vaccine from.

You say "shortly." Could you please elaborate on this? As you know, lots of people in Germany are asking for how long they will have to follow the rules of social distancing. What's your timetable?

I'm no clairvoyant. It depends on many factors that are beyond my knowledge. I guess efficient medication will take another few months to appear. The same goes for a vaccine and its broad availability. But when it comes to such a vaccine being approved to be used for humans we're more likely talking about a year or so.

Just how much of such a vaccine could your company produce once it's available?

The big imponderable right now is that nobody knows just what degree of immunity protection people require to prevent an infection. You simply can't predict this, nor can you test this on humans in an uncontrolled manner. That's where the regulators come in to oversee a stepby-step process. That's crucial as you also want to protect the test persons. So it takes some time to get the required knowledge, and you can speed up this process only to a limited extent.

As far as the availability of vaccines is concerned, mRNA has a big advantage. We know this from a vaccine that CureVac developed against rabies. There it's possible to completely protect people with just 1 microgram, meaning 1 gram of mRNA suffices to vaccinate 1 million people.

By comparison, conventional medicines often require 500 milligrams of a substance to ensure protection. Again, mRNA is very potent, you need a lot less to guarantee protection, and the material itself can be provided quickly. I think that you could have enough material in the second half of the year, but I don't know whether it will have been approved by then.

Biotechnology in Germany is usually not really in the public focus. People have heard little about biotech companies except your own rm and maybe a couple of others. Do you think that the current crisis can provide a boost to biotech research and promotion in the country?

Support for basic research is excellent in Germany. But more courage is needed to turn research findings into corporate ideas. There are many reasons for this, among them a lack of venture capital.

Modern medicine is different from conventional medicine in many ways. What we're witnessing right now is a transformation process. Moleculobiological findings about a disease are being used in the fields of diagnosis and therapy, and that's a very innovative process where Germany has a lot of catching up to do.

We have to make sure that such companies, which create both new technologies and jobs, are located in Germany.

I think the current crisis can be a wake-up call as many have realized that many relevant companies and technologies are somewhere abroad and that it would be better to have such firms and their expertise here, all the more so since we're talking about something as important as people's health.

Friedrich von Bohlen is a biochemist and the managing director of dievini. He sits on the supervisory board of Tübingen-based biotech rm CureVac.