COVID-19’s impact on the US economy

Bloomberg had an interesting piece on the ways that COVID-19 had impacted the US economy as they considered the lasting impact of COVID-19. Some of these transformations have fast-forwarded a digital transformation and look like they will permanently transform the US economy. Here are some of the stand out points from the article.

Remote work is here to stay

Bloomberg quoted a Stanford University economist, Nick Bloom, saying that he projects that 25% of work will now be done from home. He also projects that many will seek a new job if they are required to come back to the office. As a result office occupancy rates are well below pre-pandemic levels and are down to under 50% across a number of several major cities.

Hot housing market

Demand has been strong for housing in the mountain and southern US states as workers leave New York and San Francisco seeking cheaper and more rural home settings. You can see the sharp increase in housing prices across these states and the employment boost associated with the moves.

Tight labour market here to stay?

Bloomberg cites an ageing population, slower population growth and lower immigration as contributing to a lasting demand for labour. In the article, it cites evidence from Erica Groshen at Cornell University who states that around 1 in 5 adults quit their job last year. Here was the top reasons given:

Will this spark a revolution in the way workers are viewed? Certainly, a shift is underway for companies that may want to really cement their relationships with their employees.

Inflation

Of course, this one is obvious. Prior to the pandemic inflation was a genie that just wouldn’t come out of the bottle. Inflation is now driven by supply chain issues, geopolitical tensions, and surging energy prices. How much longer it will last is the crucial question, but it is one key characteristic of the age.
Bloomberg’s piece is a good overview of some of the main shifts in the US economy as the world prepares to full exit the pandemic. The main takeaway is that the recovery is very fragile and the outcome for the global economy is highly uncertain with such a threat to global security and prosperity coming from the Russia & Ukraine conflict. In the near term that means that the USD could find support in slowing global growth. The USD tends to gain in times of slowing growth. See the USD smile theory for a handy tool for understanding USD moves.

The DXY is flirting with 104.00 at the moment, around 2017 highs, but a firm bout of risk aversion + more inflation pressures for the US can see the already stretched DXY potentially push higher. Watch the level and the incoming data carefully.

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