The bounce-back to a post-pandemic economy has led to convulsing supply chains, rising prices, and a strain on labor markets. On paper, the contortions of the pandemic economy have been compared to many things—from U-shaped to a swoosh. Former CNBC Chief Economist, Dr. Marci Rossell, views the current state of the world as a “fireworks economy”—with pops of explosive growth accompanied by a lot of noise, such as inflation and supply chain disruptions.
In a 2021 Haworth Connect, Dr. Rossell spoke with Paul Nemschoff, Haworth’s Vice President of Global Strategy and Marketing, to untangle the causes of rapid economic growth and help us make sense of current inflation and supply disruptions. In the presentation, Dr. Rossell outlines several fireworks economy trends—here are 8 of them to keep in mind.
There is a recovery of explosive growth in many sectors, particularly in those sectors most affected by the pandemic, including hospitality, travel, and many types of leisure activities. The home improvement sector and anything related to real estate are also particularly strong.
Price surges are happening in many sectors, from lumber dealers to semiconductor manufacturers. In fact, a June report shows the Consumer Price Index (CPI) in the US increased by 5.4% over the previous year, marking the strongest growth since 2008.
Currently, consumers have roughly $5 trillion in excess savings globally, with about half that amount residing in the US alone. According to Dr. Rossell, that is a savings level above and beyond what there would have been in the absence of the pandemic.
“People’s perceptions of risk are permanently elevated when they believe the world is riskier, and they tend to save more overall,” says Dr. Rossell. “I do think savings rates will remain elevated for a year or even 18 months—in part due to supply chain backlogs.”
The COVID-19 pandemic accelerated the move to online retail. According to Rossell, switching from in-person shopping to online experiences fast-forwarded five years of slow-moving trends. When people did not feel comfortable leaving their homes—or they were under mandatory stay-at-home orders during the pandemic—retailers stepped in to offer online shopping experiences. As brick-and-mortar retail businesses reopen, now a blend of in-person and online shopping are almost a necessity for sales success.
The current labor market has become more challenging for businesses with the number of US workers down by an estimated 7.6 million. About 1.4 million workers have exited permanently, opting for early retirements during the pandemic. A significant portion of the remaining 6 million people in the labor market are shifting to different jobs—a long-term trend accelerated by the pandemic.
Generous unemployment benefits, coupled with relief payments, have given workers time to search for different jobs. Some people are investing in new skills that will take them out of difficult or unstable jobs, such as those in the high-touch service sector.
This shift in the labor market has roots in the financial crisis of 2008-09, when a lot of college graduates were unable to find jobs in the fields they trained for. Many took refuge in lower-paying service sector jobs. Now, however, they are looking for better-paying careers—and finding them—as the US labor supply shrinks and Baby Boomers retire, leaving high-paying jobs up for grabs.
“The days of prolific labor everywhere, particularly when immigration into the US has been significantly curtailed, are behind us,” says Dr. Rossell. “As laborers become scarcer, they’re going to be in a better position to demand more flexibility.”
Flexible Work Arrangements
In a survey by consulting firm McKinsey & Co., 9 out of 10 law firms indicated that people expect more flexibility around work arrangements. Where and when people do work has an influence on productivity, commitment, and well-being. Studies show that people value flexible work arrangements to the tune of about 8% of their salary.
“Flexibility does not mean they work from home all the time or that they don’t want or need to come to the office,” says Dr. Rossell. “The office is by no means dead; it is simply going to be different.”
As people return to the workplace, and working from anywhere continues to gain momentum, the physical office will need to be more flexible. Many employees are looking forward to being back together in the office, the hub of work and activity. But they recognize that work is likely to be done in more than one location. When we think about what the future of work looks like, it is at the center of an integrated ecosystem that balances work among three primary physical locations: office, home, and third places.
For more insights about the current fireworks economy, watch Dr. Marci Rossell’s Haworth Connect presentation.