Why Kamloops, Okanagan economies could bounce back before others - InfoNews

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Why Kamloops, Okanagan economies could bounce back before others

April 06, 2020 - 6:00 AM

An Interior based economist says the economy of the Kamloops-Okanagan region is positioned to bounce-back sooner than other regions across the country when social distancing disappears and life slowly gets back to normal.

Thompson Rivers University Department of Economics Professor Dr. Ehsan Latif said the small sector economy of the Interior region is less dependent on external economies, which may hinder other places once the novel coronavirus situation is over.

"The impact (to the economy) is coming directly from social distancing," Latif said. Once that is removed, "we will bounce back sooner."

Latif said while Alberta has to deal with a global oil crisis, the Ontario economy is heavily reliant on the automotive industry and its ties to the U.S., and Vancouver has a strong attachment to world commodity prices, the "small sector economy" of the Kamloops-Okanagan region places it in a better position for recovery once the COVID-19 pandemic is over.

Drive through any Interior small town and the empty streets and closed businesses make the prospect of economic recovery look daunting.

Venture Kamloops Business Development Society executive director Jim Anderson said local economies that hold a lot of diversity are better-positioned to recover in harder times and the economy of Kamloops fits that model.

In the city of around 100,000 people, healthcare is the biggest employer accounting for roughly 15 per cent of all employment. The retail sector combined with accommodation and food services accounts for roughly 25 per cent of all jobs, while the rest of the working population's jobs fall into almost two-dozen other sectors.

Anderson said this diversity allowed Kamloops to weather the 2008 financial crisis fairly well, although he knows the city won't escape the pandemic in the same way.

"Regardless of how optimistic we talk about recovery, it's still going to be devastating," he said.

Unfortunately, Anderson's forecast is likely to be right.

A report released March 31 by the Canadian Federation of Independent Business found that 32 per cent of small businesses that had closed completely are unsure whether they will reopen. From the roughly 10,000 respondents to the survey, 46 per cent were partially closed and over 90 per cent said sales had decreased.

While a small sector economy may prove to be an advantage in the long run, the type of business also plays a part.

"There's going to be a lot of people who need a haircut," Spruce Salon owner Katie Matheson told iNFOnews.ca. "So in that sense, I don't feel a fear."

The normally bustling salon sits empty, along with almost every other business in downtown Vernon's main street. Two months ago a phone call to book a Saturday appointment might see clients waiting weeks for a spot. Now the salons 11 members of staff wait in line for Employment Insurance.

Matheson has two businesses: a profitable salon in Vernon now in its fifth year, and a Lake Country salon which would be celebrating its first birthday in a few days if it was open.

"I'll be using the profitable one to keep the other one," she said.

Matheson is being optimistic and knows if her business was new or already struggling, her situation would be very different. She's also hugely grateful the Federal Government is allowing her to claim Employment Insurance. As a self-employed business owner, she would normally be exempt.

But even for those who feel like they're currently in a reasonable position, how long the coronavirus pandemic lasts will make a difference.

"If it's two months... we'll get through," Matheson said. "If this ends up being four to six months this will be a massive issue."

Spruce Salon owner Katie Matheson cuts hair January 2020. Both her businesses are now closed.
Spruce Salon owner Katie Matheson cuts hair January 2020. Both her businesses are now closed.

When social distancing rules are lifted, the everyone is going to need a haircut, and is likely to want to go out and socialize and eat. Restaurants Canada says 121,500 foodservice jobs have been lost in B.C. since March and one in ten restaurants have closed permanently.

Restaurants reopening, and thousands going back to work, will likely kickstart a small sector-based economy but the public likely won't be flocking back to all businesses that have had to lay people off.

In a small business park on the outskirts of Vernon, the shutters stay closed at Meyer Sound, a California-based sound equipment firm most people wouldn't realize was there. The company's speakers are used by everyone from Metallica to the San Francisco Opera, but the company laid off the dozen or so engineers and IT workers at it's Vernon research and development unit just a few days into the pandemic.

City of Kelowna director of business and entrepreneurial development, Robert Fine, says the Interior is probably in a good position for recovery partly due to the sheer amount of self-employed people.

"Entrepreneurs are incredibly resilient and will come up with ways to cope with the challenge and come up with a new vision," Fine said. "I think we’re probably in a good position to weather this on the recovery side.”

Fine said if restrictions continue on international air travel, Canadians are far more likely to holiday locally, helping the Okanagan's tourism industry.

Both Fine and Latif also believe the province’s performance in containing COVID-19 — which currently has far fewer cases than Ontario and Quebec — is key to economic recovery.

"At this moment, life first, then economics," Latif said.


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