As the pandemic recedes and mass vaccinations proceed, the U.S. economy appears due for a record-breaking year of job growth. With Democrats promising an extra $1,400 stimulus check and massive infrastructure spending, economists have been slicing their year-end unemployment forecasts — some to 4.5% or lower. That level took a decade to get back to after the financial crisis.
Yet Covid’s imprint on the U.S. economy and labor market will be lasting. All the pandemic’s changes in how people do things — the shift to online grocery shopping and working from home — and how businesses have adjusted to threats and opportunities have major implications for the economic cycle.
As tech-savvy giants such as Walmart (WMT), Amazon.com (AMZN), General Motors (GM) and McDonald’s (MCD) lead an investment boom to capitalize on trends accelerated by the coronavirus, productivity growth is likely to continue its post-lockdown resurgence. That could help tame a coming rebound in inflation and limit the need for much Federal Reserve tightening. Yet there’s a risk that the K-shaped U.S. economic recovery — in which low-income workers struggle as the rich get richer — could linger as the clock ticks down on some essential jobs added during the pandemic.
Like Rosie the Riveter in World War II, the exploding ranks of Instacart shoppers have played a critical role. Yet high demand for their fundamentally low-tech work has helped launch an era of technology-led job disruption. Huge corporations are accelerating robotics investment to turn pandemic-era market-share gains into profits. The need for speedy service and social distance has only bolstered the attractiveness of automation for businesses and consumers. That has sealed the case for rapid deployment of labor-saving technologies. Meanwhile, R&D investment is surging as tech giants, startups and big automakers gear up for a faster shift to EVs and a race to deliver self-driving cars.
‘Pandemic Rules’ Give Companies ‘Cover’
Automating major sectors of the $21 trillion U.S. economy will be a marathon, not a sprint. Major technological challenges remain to be solved. But companies now playing by “pandemic rules” have turned up the dial on the era of Amazon-led disruption that preceded it.
“Businesses across industries have taken advantage of the pandemic to more fully deploy technologies and process changes that they were investing in but reluctant to take full advantage of during the good times,” wrote Mark Zandi, chief economist at Moody’s Analytics. “They knew those changes would entail difficulty for their labor forces. The pandemic has effectively given businesses cover to make these wrenching changes.”
By the end of the decade, a tech-driven productivity boom could imperil 17 million mostly low-wage positions — about 25% more than would have succumbed to automation if not for Covid, McKinsey estimates. One of the key policy challenges for the decade ahead will be to make sure…
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