Unemployment is looming on the Horizon

Unemployment is perhaps the most devastating economic consequence of the COVID-19 pandemic. Its impact on the U.S. economy was well illustrated by a front-page from the New York Times last week. Added to that is that pandemic could permanently erase many jobs. 

That applies to Turkey. There are two reasons why many jobs will not come back. First, some businesses will not reopen in the wake of this calamity. Second, consumer demand is unlikely to return to pre-pandemic times for a while. There are two factors behind the latter. On the one hand, the consumer is altering their behaviour. Consumers will be reluctant to consume as they used to. 

On May 4, President Erdoğan announced the start of a normalization process in Turkey by approving the reopening of shopping malls and beauty parlors as of May 11, and lifting intercity travel bans for seven cities. The fact that the daily data on the pandemic is improving each day has been key in starting the normalization process mid-May rather than after of the Eid holiday. 

Though this process is widely believed to benefit the economy, its risks on public health remain a cause for concern. Since the reopening of shopping malls, footage of people waiting in crowded lines and violating the social distancing rules have surfaced online. In fact, it has been claimed that around 1 million people went to shopping malls on the very first day they were reopened. 

Several experts have raised the prospect of a second or even third wave in the pandemic. Besides, the pace at which people return to their old habits remains uncertain. In short, the extent to which the lifting of the measures will shore up the economy is a matter of debate. 

In light of this, in our latest survey at TürkiyeRaporu.com, we asked our respondents “How likely are you to do the following activities compared to pre-pandemic times?” and offered them three options: “less than before,” “same as before,” and “more than before.” Among the nine activities we proposed, air travel appears to be most hard hit sector. 61.6% of our survey participants stated that in comparison to the pre-corona era, the pandemic people will engage in less air travel.  

A similar percentage applies to public transportation usage and visits to the shopping mall. Such figures demonstrate that the psychological effects of the crisis will persist due to the continued necessity of social isolation. Activities such as going out to a restaurant, going to the cinema or to the stadium to watch a sports game will likely drop as 55% of our respondents stated that they would engage in these activities to a lesser degree than they previously did. 

All the aforementioned activities require spending money and 50% of our respondents said they would cut down on expenses. The only two activities that respondents said they would engage in as much as they did previously were online shopping and going to the hairdressers. It is also worth noting that 14.6% of participants stated that they would engage in more online shopping than they used to.  

Thus, it is safe to say that consumer habits will change drastically in the aftermath of the pandemic. In Turkey, 36% of jobs belong to the services sector. The drop in demand will inevitably affect those jobs. 

What is more, even if consumers were willing to return to their old habits, their new budget constraints might compel them to act otherwise. Our latest poll reveals that consumer debt has soared during this period. In short, demand will be suppressed for a while. That, in turn, will cause a spike in unemployment.