If youâ€™re like us, then no doubt youâ€™ve been frustrated with the lack of consensus by economists and other so-called experts about the future of our economy. In the morning, weâ€™ll hear a prediction of a full recession in the coming months; in the afternoon, someone else will predict a mild recession with a â€œsoft landingâ€: and in the evening, another talking head will say that everything is fine for the indefinite future.
The combination of the COVID-19 pandemic, the ensuing supply-chain issues, and a land war in Europe for the first time since WWII has skewed everything for which there is no direct precedent in the modern era. Todayâ€™s economy is an amalgam of every economic era since WWII. We can draw some parallels to previous situations, but there are no direct analogies.
In addition, two factors are having a huge effect on the labor force, which in turn are affecting the overall economy.
The first is the retreat from the workforce of Baby Boomers, a trend that was accelerated by the pandemic. The Baby Boomer cohort has had an out-size effect on the economy and American life since they were born and they continue to do so today. In addition, Boomers are staying in their homes longer (which diminishes the supply of housing for Millennials) and, now that they have more leisure time, are traveling more (instead of buying stuff), and thus inflating the demand for service sector workers.
The other big factor accounting for the labor shortage is the trend of many younger workers both for remote work and to work fewer than 40 hours per week. These new realities are having ripple effects throughout the economy, particularly for the office real estate market and the small businesses in our major cities that depend on foot traffic from office workers. The only thing that is clear to us is that none of the so-called experts have any idea what is going on with the economy and have even less of a clue about the future. To paraphrase Plato (quoting Socrates), the only thing they know is that they know nothing.