Jobs lost to COVID-19 could be slow to win back.
Unemployment rates could surge by over 3 percentage points (ppt), or more than twice as much as an average recession, as social-distancing measures hit the Asia-Pacific service sector, according S&P Global Ratings report. An expected 7.5 ppt hit to growth from the COVID-19 pandemic could even cause it to rise as much as 4 ppt.
Sharp spikes in unemployment tend to repair slowly, said the report, taking it longer to normalise employment levels given the circumstances during the pandemic. Policymakers thus encourage firms to keep workers on payroll, provide wage subsidy programmes, and slash payroll taxes to limit the damage to the labor market.
However, small and midsize enterprises (SMEs), which created many of the service sector jobs with 55 out of every 100 workers, usually have fewer resources to draw on during an economic crisis. As revenues collapse, these firms will be forced to cut the largest expense, which in many cases is the wage bill.
Job losses are also expected to hit households' debt-servicing capacity, encouraging higher saving and lower consumption, which could affect Australia, Korea, Malaysia, and Thailand the most.
Workers may also suffer from a cut in their hours and wages even if they do hang onto their jobs, S&P added.
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