As investors come to grips with the massive drop in economic output inflicted by the outbreak of Covid-19, the focus is turning to the aftermath: What will the recovery look like, and what will normal mean in a post-pandemic world?

From the outset, it was evident that the depth and breadth of the economic fallout would be dictated by the trajectory of the disease. Once the infection rate begins subsiding, some curbs on economic activity should loosen gradually, thus allowing a recovery to take hold.

Current infection modelling points to the disease reaching its peak in North America by early May. For example, data released by the Ontario government on April 20 indicate that the rate of “community spread” in the province has probably peaked and is beginning to decline, although infection rates in long-term care facilities continue to grow.

In the U.S., modelling by the University of Washington’s Institute for Health Metrics and Evaluation (IHME) suggests that the peak of Covid-19 deaths occurred on April 15 and the death rate will level off by the end of May.

While these trends are positive, economic activity is unlikely to revive immediately after the peaks. A report from Montreal-based National Bank Financial Inc. (NBF) analyzing the IHME data suggests that relaxing physical distancing requirements may be possible in 26 U.S. states (representing about half of U.S. GDP) by the end of May, provided that testing capacity, contact tracing and crowd size restrictions are in effect.

“In other words, business is not getting back to normal anytime soon,” the NBF report states.

Toronto-based Toronto-Dominion Bank’s (TD) economics division also is forecasting that the economy won’t begin to recover and GDP and job growth won’t pick up until June: “Rebooting the economy will result in double-digit growth rates and a meaningful decline in unemployment in the second half of this year.”

The TD report also predicts that about half of the jobs lost in the first two quarters of 2020 will be regained in the third quarter, but GDP growth will not return to pre-pandemic levels until 2022.

A report from New York-based Morgan Stanley states the initial recovery represents the end of the beginning for the Covid-19 outbreak, not the beginning of the end. While the report also forecasts that the U.S. economy will begin to recover in mid- to late May, the process will take time.

That process will require “turning on and off various forms of social distancing and will only come to an end when vaccines are available, in the spring of 2021 at the earliest,” the Morgan Stanley report states.

The Morgan Stanley report adds that many workers won’t be able to get back on the job until “herd immunity” is achieved — that is, when about 60% of the population has developed resistance, either through vaccination or from surviving the disease.

In the meantime, restrictions will be needed to prevent a secondary outbreak, including limiting large gatherings such as sporting events and concerts.

Given these expectations, the Morgan Stanley report forecasts a shallower rebound for the U.S., echoing the TD report’s forecast that the economy won’t fully recover until 2022.

This slower recovery won’t happen to the same degree throughout the economy. Certain sectors will take longer than others to recover, and some may never fully recover. Others should be able to rebound relatively quickly, and may even enjoy stronger growth.

For example, the rapid shift to remote working is likely to stoke demand for increased telecommuting capacity. The latest data from Statistics Canada indicate that about 40% of employees work from home now, up from slightly more than 10%. Online commerce and mobile financial services, which have been the fallback options for many businesses in the midst of the shutdown, may be the beneficiaries of a permanent shift in consumer behaviour — at the expense of brick-and-mortar locations.

Economists anticipate several long-term structural changes will arise from this episode.

“For starters, this pandemic will intensify three trends that were already growing in industrialized societies: telework, telemedicine and virtual learning,” states the NBF report, adding that this shift will drive demand for related hardware and software and also could stoke demand for automation and robotics.

The NBF report also states that, at least in the short term, consumers will be more willing to give up some of their privacy in exchange for more vigilant disease prevention through growing use of telehealth options: “[As with] surveillance technology, many people have shifted from worrying about the fast pace of automation eliminating jobs to viewing it as a must for disease prevention, at least for the time being.”

These forecasts of growing demand for technology that enables physical distancing are echoed in a report from Toronto-based Bank of Montreal’s (BMO) capital markets division. In addition, the report forecasts other long-term effects, including shifts in supply chains (with increased emphasis on domestic manufacturing, particularly for critical medical supplies, drugs and other products) and swings in commercial real estate demand (away from office space and storefronts and toward warehouses and logistics).

“The crisis, in some sense, has brought the future into the present, rapidly and sometimes harshly accelerating changes that were already in train,” the BMO report states. “There is no doubt that some sectors face long-term challenges as a result of the shutdowns and distancing measures, as well as some potentially fundamental changes in consumer behaviour and psychology. But at the same time, in classic creative destruction fashion, there will be some sectors that strengthen and step into the gap.”

Alongside the economic changes, analysts anticipate macro effects from the pandemic.

A report from Toronto-based Bank of Nova Scotia’s economics division forecasts that the economic fallout is likely to leave the administration of U.S. president Donald Trump with the worst economic record for a U.S. president in the modern era (as measured by GDP performance) as well as middling stock market results.

The NBF report shared a similar sentiment: “Trump is facing difficult election prospects” in the wake of Covid-19.

The NBF report forecasts a variety of other effects on the U.S., including an increase in health-care spending, stockpiling of medical supplies and rising government deficits that may ultimately drive higher taxes.

“The impact of Covid-19 on the American landscape will long outlast the epidemic,” the NBF report concludes.