Changed economy will follow COVID
All Texans will soon be eligible for COVID-19 vaccines, businesses are cleared to reopen, and forecasters expect both private and government spending to trigger economic growth not seen in 20 years.
Businesses will boom; workers will find jobs. But they will be different from the before times. As the end of the pandemic begins, we need to think long and hard about how business will be different and how we might prepare for different jobs.
Predictions for 2021 growth in U.S. gross domestic product, a broad measure of goods and services, range from 4 percent to 6.5 percent. The last time annual GDP growth broke the 4 percent level was in 2000, the height of the internet boom.
“The pandemic is not over, but it is starting to look like we have entered the final phase of the economic crisis,” said Brian Coulton, chief economist at Fitch Ratings, a market intelligence firm. (Fitch is owned by Hearst Corp., the parent of the San Antonio Express-news.)
Economists credit steps by the Federal Reserve and other central banks with supercharging the global economy by making it inexpensive to borrow money. But for those policies to work, corpo
rations must borrow and spend the money, and boy, have they.
Global corporate debt hit a record $201 trillion at the end of 2020, which is more than 2½ times annual global economic activity, according to S&P Global Ratings, another financial data firm.
The private sector has more than enough cash to ramp up production, but it still needs customers. The COVID-19 pandemic panicked many who lost jobs or feared losing their jobs, leading to lower spending. Folks wisely saved their pennies and stayed home.
Governments worldwide have handed out considerable sums to ease those fears, both to business owners and individuals. The U.S. has spent $6 trillion in the past year alone to make up for the economic slowdown. Those funds are enough to spur economic growth for the next two years.
Governments have not intervened in the global economy to this degree since World War II. Critics worry the spending will trigger inflation, which is when prices for goods and services rise faster than incomes. But most economists say not to worry.
“Virtually everyone is expecting prices to jumpstart next month,” said Beth Ann Bovino, U.S. chief economist at S&P. But the price hikes will be transitory and simply raise the cost of goods and services to a healthy level, something economists call reflation.
Federal Reserve Chairman Jerome Powell told Congress he is more worried about unemployment than inflation. The U.S. has 9 million fewer jobs today than it did last year, and 20 million Americans remain on some form of unemployment assistance.
“The lost jobs were disproportionately lowwage, low-productivity jobs,” according to a new analysis by the Brookings think tank. “The POSTCOVID recovery will be different as well.”
Last summer, I noted that economists have never seen a million jobs added in a month. But economists at Brookings believe the U.S. could average between 700,000 to a 1 million new jobs a month this year.
The economic recovery, though, will not be evenly distributed. The COVID-19 pandemic has changed consumer and worker behavior in ways we probably do not yet fully understand. Businesses have learned to operate with fewer people, relying more on automation or higher-skilled staff.
More than a third of the job losses occurred in the leisure and travel industry. Those jobs will take the longest to recover, if ever. Businesses have cut back on travel budgets, and new variants of the virus could reduce foreign travel for years.
Stimulus spending and pent-up demand, though, will likely spur job growth in health care, manufacturing and construction. Higher-skilled staff will be in demand.
When China shut down last year, companies discovered they could not rely on long-distance, just-in-time supply chains. Rising political tensions with China have also reduced enthusiasm for globalization. U.S. factories are beginning to grow again.
A survey by the Association of Equipment Manufacturers reveals some significant trends. While 88 percent of the group’s members report a positive outlook for 2021, 80 percent also said COVID-19 would have a long-term impact. A majority worry about employee safety, a shortage of skilled workers and supply chain disruptions.
On an important note for the hospitality industry, more than twothirds expect trade shows to be very different in the future and more likely virtual.
Every business owner needs to rethink their business plans for the post-pandemic economy. But more urgently, every worker needs to reconsider their career choices because some of the old jobs are never coming back.
The post-pandemic economy will require more technologically advanced businesses and more highly skilled workers. More than ever, workers need to make sure they have the skills employers want.