As I discuss college enrollment, retirement planning, job hunting, and economic prospects with the folks in my network, it’s becoming clear that no matter what the sector, things don’t add up the way they used to. Earning a living, deciding where to live, being entertained, staying healthy, moving about, and getting educated have all seen major shifts. This month I’ll attempt to enumerate some of the many changes that have happened.
The baby boom generation is hitting retirement just as inflation decreases purchasing power and retirees’ stock portfolios have shed a significant fraction of their value. The path forward is a mystery: Russia’s geopolitical ambitions, energy uncertainty, a pandemic still capable of sudden changes of direction, and climate risk make economic forecasting nearly impossible.
In entertainment, streaming has displaced physical media, broadcast television, and movie-going. Theater attendance was sliding before Covid, plunged during, and hasn’t recovered after. For their part, the studios now produce a record number of remakes and serials, many of which are based in the land of comic books. Live sports, the last refuge of broadcast TV, now commands astronomical rights fees, with the result that the networks have a large voice in scheduling and even the composition of college sports conferences: driven by football, the SEC is shaped by ESPN while the Big (formerly) Ten is the conference of Fox.
Looking at transportation and logistics, the pre-Covid truck driver shortage is worse. Shipping costs spiked as fuels prices did so. Containers were nearly impossible to obtain (in part because so many were stuck awaiting unloading at Chinese ports during lockdowns, at Long Beach, and elsewhere) but now are almost back at normal rates after dropping 30 consecutive weeks (https://www.drewry.co.uk/
In personal transportation, car production was hampered by labor issues during the pandemic then by microprocessor shortages after the acute phase of Covid waned. Airline and car rental fleets shrunk, leaving them unprepared for the surge of pent-up demand, disproportionately leisure travelers, that hit the industry in 2022. Mass transit is perennially underfunded in the US, and Covid drove up costs while temporarily curtailing ridership. Now the reckoning is happening: Boston had to close a major line for a month even as the whole system operates below capacity because of labor shortages. Washington DC’s Metro doesn’t catch fire as often as it did, but it was operated under federal safety oversight (as Boston now is) from 2015-2019. New York City is still working to convince riders that the system and its platforms are safe. Overall, rising gas prices should make mass transit more appealing, but few US operations can successfully attract or capably serve ridership. In part as a result of poorly performing and nonexistent mass transit, car traffic continues to clog roads, gas prices notwithstanding.
All those leisure travelers can’t make up for the loss of so many business travelers, can they? Business trade shows and conferences will likely never rebound to pre-2020 levels, in part because of strict corporate cost control after Zoom proved itself adequate to many face-to-face scenarios. Just as businesses near office buildings suffer when nobody comes to work on site, so too do airlines, hotels, cab drivers, and restaurants feel the lack of expense-account travel. How soon will the macro picture reflect a new landscape for business travel? What will be the future of auto shows, CES, conferences, business entertaining (look at NBA ticket prices and attendance patterns), and other large-scale business-travel events?
In multiple sectors, Covid reshaped the labor landscape. Work from home led many people to move to resort towns that lack the infrastructure for the surge in new residents, and many of these towns including Boise, ID are doubly vulnerable because of drought (https://www.bbc.com/worklife/
In some instances, the Covid shutdowns (dentists’ offices come to mind) accelerated decades-long patterns of declining enrollment in vocational and trade training. Now, there are massive shortages not only of dental hygienists but also HVAC technicians, roofers, plumbers, automobile mechanics, and carpenters. Part of this shortage is demographic: as previous employees age out of the work force, there simply aren’t enough US-born replacements. In a recent remodeling job, my drywaller was Mexican, the tile installers Romanian, and the suggested plumber Cuban. General contractors are so busy that none would even bid the job so I did much of the work and all of the project management myself.
The demographics of immigration, however, are keeping millions of potential workers out of the country, whether H1B technologists or entry-level workers who do tough, challenging work like meat processing or farm labor. That shortage at the bottom of the wage ladder is helping drive up food prices, to take only one side effect.
Higher energy costs ripped through many economies, driving other prices — transportation, heating, food — up almost immediately. Even though gasoline prices are receding, albeit far more slowly than they rose, the fundamental instability of the sector is troubling. Climate change, either in the form of temperature extremes that spike demand or catastrophic events that wipe out transport or refining capacity, and geopolitics head the list. Electric vehicle production suffers from shortages of both electronics and raw materials for batteries, and the grid in some states was stressed by drought and heat waves: California passed an EV mandate within weeks of climate-related requests to limit the charging thereof. (https://www.nytimes.com/2022/
All things considered, we live in a riskier world than 10 years ago. How many houses and businesses can a property/casualty company insure in the face of flood, wildfire, hurricane, and tornado frequencies all rising? Man-made risks are also increasing, but the cost of cybersecurity insurance, to take one example, has risen to the point that many hospitals and businesses, some of whom recently paid ransoms to get their systems unlocked, are flying naked.
Not all risk can be hedged or insured. For example, what is the risk brought by Covid, either in the form of future mutations or long-wave effects of past infections? Nobody knows. Life expectancy in the US is dropping at a stunning rate (https://www.cdc.gov/nchs/
Much of today’s instability is the result of chain reactions. With (previously) lengthening life expectancy came the need for elder care, to take one example. Nursing homes are both expensive and filled to capacity, so having to care for a family member can affect the caregiver’s role in the paid labor force. The same is true early in life, given the lack of pre-school and universal pre-kindergarten. At the same time, the US population pyramid is relatively healthy, unlike many nations where a shrinking population will cause other issues in the coming decades.
Another chain reaction arises from student debt. With funding assured, colleges had little incentive to cut costs as price increases were passed through to a relatively price-insensitive market. (Look at how many decisions in higher education are driven not by cost/benefit/risk analysis but by “prestige” and “our peer institutions.”) Covid did very little to slow the growth of debt, which carries over into such things as home-buying, car-buying, and perhaps moving back in with one’s parents. In a time when debt can spur despair and mental health is a major concern, what is approaching $2 trillion of student debt has to be affecting quality of life.
Education has traditionally provided both a ladder out of poverty for the worker and a skilled labor force for employers. Covid’s impact on K-12 instruction is becoming visible, and the news is grim as millions of student-years appear to have been lost either to students dropping out or to the limitations of remote instruction. One early estimate suggested three million US students disappeared from school rolls, and that’s almost certainly an undercount.
Another domain of extreme uncertainty is that of the employer and manager. Whether you’re staffing a restaurant, running a software shop, or in charge of an office, there’s little confidence that last month’s work force will still be coming in this month. In jobs that went remote, many workers are balking at full return-to-premise mandates. Banking can probably wave enough carrots and sticks to get people back in the door, but Apple is facing organized employee resistance. Less dramatic but said to be far more common — half of US workers say they’re doing so, according to Gallup — is “quiet quitting,” the scaling back of performance to the bare outlines of the job spec. Part of why the economic scene is so hard to read is the unprecedented combination of low unemployment, skills shortages, high inflation, and high uncertainty regarding everything from constitutional democracy to the status of waterfront property on the Atlantic Ocean.
That’s a breathless, unsystematic look. As we noted at the outset,
-earning a living
-deciding where to live
-being entertained
-staying healthy
-moving about
-and getting educated
no longer behave as they did in 2010 or even 2015.
The implications will be substantial. Bicycles, including e-bikes, scale far better, and better promote personal health, than does driving, but the US has such low population density that I doubt cycling will move the needle here any time soon; it’s also still too dangerous in cities that still favor automobiles. Student debt is among several drivers forcing colleges and universities to think in terms of sunsetting and retrenchment as part of the budgetary vocabulary. Climate change will render many areas too risky to insure or simply uninhabitable given lack of water. Cities will continue to grow and many states will continue to lose population, though the water-starved Western US could lose its appeal after receiving massive inflows over the past two decades. The world’s portfolio of energy generation is in a period of upheaval — parts of Europe are turning back the calendar 350-400 years and burning wood for fuel — and the transmission/distribution grid will need to be rebuilt as well. Increases in life expectancy may be slowing, but the need for medical and nursing care still far exceeds the supply. Similarly, birth rates may not be surging, but child care can be impossible to find, or to afford. What are families going to do with those at both ends of the age spectrum?
The list goes on. Many habits to which both people and institutions grew accustomed will be examined under the harsh light of the new reality. Fate will, I believe, favor the flexible.
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