Columnist Richard Fein: The uncertain future of the economy

Posted: 07/25/2021 8:00:12 AM This column deals with the US economy and what it could look like for the next few years. It will foc...



Posted: 07/25/2021 8:00:12 AM

This column deals with the US economy and what it could look like for the next few years. It will focus on just two important unknowns – labor and inflation.

Is the workforce changing? The COVID-19 pandemic has spurred a number of changes in the way people work and what they expect from their jobs. For example, 56% of American workers “always” or “sometimes” worked remotely during the pandemic. We don’t know how many employers will insist they return to the physical workplace and how many employees will be willing to comply five days a week, if necessary.

The unemployment rate is still high at 5.9%, but 7.5 million jobs are unfilled. Part of the reason is that jobs and job seekers are not in the same geographic area. However, there are also millions of people who could but do not want to accept the jobs offered.

Many are looking for better working conditions and / or better pay. Many are looking for something different from what they have done in the past or a more relaxed work schedule. A lot of people of working age aren’t even looking for a job right now. As more people are fully vaccinated and the economy reopens, will the changes caused by the pandemic continue or revert to the pre-pandemic situation? We just don’t know.

For Massachusetts in particular, a recent report by consulting firm McKinsey contains troubling findings, but they are “probably” not “certain.” The report predicts that “Massachusetts’ post-pandemic economy is likely to pave the way for permanent remote working, increased demand for e-commerce, and more automation, potentially displacing around 25% of workers over the next decade. … Massachusetts could see a movement away from its “urban core” fueled by remote working and technological change. But the changing economy could trigger a mass exodus of residents in search of a lower cost of living and disproportionately hurt non-whites, women, and low-income workers if they don’t get it. not the right skills training, affordable housing and more accessible child care.

Will inflation become a serious problem? A definition of inflation is: “The increase in the general level of prices, often expressed as a percentage …”. In other words, a lot of things cost more than they did in the recent past.

Inflation can be caused by a number of things. Here are two: The need for employers to offer higher wages and other forms of compensation tends to result in higher prices. In addition, a shortage of workers can cause problems for the overall economy. For example, long distance trucking is a problem because there are not enough drivers to transport the platforms from one place to another. This tends to make goods rarer and / or more expensive. In terms of supply train, the list of products that use computer chips is huge. But Marketplace reports that manufacturers are waiting 18 weeks to get them.

The Federal Reserve isn’t particularly concerned about inflation right now. He expects prices to rise 3.4% in 2021, but says growth will slow to 2.1% in 2022 and settle near his longer-term target of 2%. However, the Bureau of Labor Statistics report for June shows an inflation rate of 5.4%.

The Federal Reserve considers this increase to be temporary and notes that the price increases have been concentrated on a limited number of products. For example, the price of used cars is up 41.3%. The cause was a shortage of new cars, which in turn was caused by a shortage of computer chips needed to run any modern car. When there is a shortage of new cars, demand increases for used cars.

The Fed predicts that the situation will correct itself as the computer chip supply chain recovers from disruptions attributable to the COVID pandemic. Many leading economists disagree with the Fed. They fear inflation may hit double digits, as it did in the 1970s, due to lingering supply train issues, massive federal deficit spending, and anticipated reserve reluctance. federal government to raise interest rates sufficiently and / or on time.

It is important to keep in mind that the destruction caused by climate change; a resurgence of COVID or a similar pandemic; war, even if our country is not directly involved; and social / political upheavals could each cause many economic problems, including inflation. These causes may not be taken into account in the Fed’s econometric models or be controllable by government policy.

The future direction of our economy depends on many factors that are either fraught with uncertainty or external to the economy. Well-informed people can forecast one way or the other, but no one really knows what the economy will look like in the next few years.

Richard Fein holds a Master of Arts in Political Science and an MBA in Economics. He can be reached at columnist@gazettenet.com.



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Newsrust - US Top News: Columnist Richard Fein: The uncertain future of the economy
Columnist Richard Fein: The uncertain future of the economy
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