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2020 has changed the economy in ways we can’t yet understand

During a conference call Wednesday morning, Yum Brands CEO David Gibbs expressed the confusion many people are feeling as they try to figure out what’s going on with the US economy right now:

“It’s really one of the most complex environments we’ve ever seen in our industry. Because we’re not just dealing with economic issues like inflation and slowing stimulus and things like that. But also the social issues of people returning to post-lockdown mobility, working from home and just changing consumer habits.”

Three months earlier, during the company’s pre-call with analysts, Gibbs said economists who call this a “K-shaped recovery,” where high-income consumers are doing well while households at low income struggle, oversimplify the situation.

“I don’t know in my career, we’ve seen a more complex environment to analyze consumer behavior than what we’re facing right now,” he said in May, citing inflation, rising wages and federal stimulus spending that still fuels the economy.

At the same time, societal issues like post-Covid reopening and Russia’s war in Ukraine are weighing on consumer sentiment, which “creates a fairly complex environment for figuring out how to analyze and market it to consumers. “, said Gibbs.

Gibbs is right. Things are very strange. Is a recession coming or not?

There is plenty of evidence in favor of the “yes” side.

Tech and finance are bracing for a downturn with slowdowns in hiring and job cuts and calls for more efficiency from workers. The stock market has seen a nine-month slump with the tech-heavy Nasdaq down more than 20% from its November peak and many high-flying tech stocks down 60% or more.

Inflation encourages consumers to spend less on non-essential purchases like clothing so they can afford gas and food. The US economy has contracted for two consecutive quarters.

Downtown San Francisco doesn’t quite have the ghost town feel it had in February, but it still has vast swaths of empty storefronts, few commuters and record commercial real estate vacancy rates, which is also the case in New York (although Manhattan feels a lot more like it’s back to its pre-pandemic bustle).

Then again:

The travel and hospitality industries are not finding enough workers. Travel has returned to near 2019 levels, although it appears to be cooling as summer winds down. Delays are common because airlines cannot find enough pilots and there are not enough rental cars to meet demand.

Restaurants are facing a severe labor shortage. The labor movement is having its biggest year in decades as Starbucks retail workers and Amazon warehouse workers try to use their influence to win concessions from their employers. Reddit is filled with threads of people leaving low-paying jobs and abusive employers to… do something else, though it’s not always clear exactly what.

A declining economy is usually not accompanied by high inflation and a booming labor market.

Here’s my theory on what’s going on.

The pandemic shock turned 2020 into an era-changing year. And just like the terrorist attacks of September 11, 2001, the full economic and societal effects will not be understood for years.

Americans have experienced the death of family and friends, long-term isolation, job changes and loss, lingering illnesses, urban crime and destruction of property, natural disasters, an election presidential election that much of the losing party refuses to accept and an invasion of Congress by an angry mob, all in less than a year.

Many people deal with this trauma — and the growing suspicion that the future holds more bad news — by ignoring propriety, ignoring societal expectations, and even ignoring the harsh realities of their own financial situation. Instead, they seize the moment and follow their whims.

Consumers do not act rationally and economists cannot make sense of their behavior. It’s no surprise the CEO of Yum Brands, owner of Taco Bell, KFC and Pizza Hut, can’t either.

Call it the great commotion.

How could this manifest? In a decade, how will we look at the 2020s?


  • Older workers will continue to leave the labor market as soon as they can afford it, spending less in the long term to maintain their independence and consolidating freelance or part-time jobs as needed. The labor market will remain worker-oriented.
  • Workers in lower-paying jobs will demand more dignity and higher wages from their employers, and will be more willing to change jobs or quit if they don’t get them.
  • People will move more for lifestyle and personal reasons than to seek employment. Overworked workers will continue to flee urban environments for the suburbs and countryside, and suburbs one to three hours away from major cities will see rising property values ​​and an influx of residents. Devoted townspeople will find reasons to change towns, creating more churn and reducing community ties.
  • The last vestiges of employee loyalty will disappear as more and more people seek fulfillment before getting paid. As a technician who quit her job at Expedia to work for solar technology company Sunrun recently put it, “You just realize there’s a little more to life than maximizing your compensation package.”
  • Employees who have proven they can do their jobs remotely will resist returning to the office, forcing employers to make hybrid workplaces the norm. Spending habits will change permanently as businesses serving commuters and urban workers continue to struggle.
  • Those with disposable income will spend it vigorously on experiences – travel, restaurants, bars, hotels, live music, outdoor living, extreme sports – while limiting the purchase of high-end physical goods and home entertainment, including broadband internet access and streaming. media department. The pandemic was an opportunity to retreat and improve the nest. Now that we have all the furniture and platoons we need, it’s time to get out there and have some fun.

It is possible that this summer will be the cornerstone of this period of uncertainty and that consumers will suddenly stop spending this fall, sending the United States into a recession. Other “black swan” events like wars, natural disasters, a worsening or new pandemic, or more widespread political unrest could similarly crush any signs of life in the economy.

Even so, some of the behavioral and societal changes that have occurred during the pandemic will prove permanent.

These signals should become clearer in earnings reports as we move away from comparisons of a year ago to the pandemic lockdown era and as interest rates stabilize. Then, we’ll find out which companies and economic sectors are truly resilient as we enter this new era.

LOOK: Jim Cramer explains why he thinks inflation is falling

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