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How The U.S. Economy Will Fundamentally Change: Gary Shilling - YouTube
Channel: CNBC
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We're bringing together some of
the brightest minds in finance
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and economics, to answer
questions about the new normal
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of work, everything from which
jobs are going extinct, to what
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the future workplace will even
look like in a post pandemic
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world. In this episode, we're
speaking with Gary Shilling.
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He's a financial and economic
advisor who has a track record
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predicting recessions. So what
does the workplace look like
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once the workforce is
vaccinated?
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Well, it's gonna look different.
Obviously, people have gotten
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used to working from home. And
we are learning how to use
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telecommunication technology
that's really been there, but we
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never use it. I mean, I'm using
I just got awesome client calls
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using zoom, that's becoming
standard. But maybe people will
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be working one or two days in
our offices, as opposed to being
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there full time. The polls show
that over half of employees
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would like to not spend full
time in their offices, if people
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really want to work from home
more of the times during a week,
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companies are going to have to
adapt to that.
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Employers are legally allowed to
fire employees who refuse to get
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the vaccine. But will they
actually go through with it?
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That's a good question, I think
it's probably going to happen
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more more on a state by state
basis where a lot of those
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regulations are formulated and
enforced. If a employer in
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effect says you got to be
vaccinated, and some people say
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I don't want to be, then the
other employees are gonna say,
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wait a minute. And you know, I
rather suspect we're going to
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end up with some kind of
identity cards, you want to go
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on an airplane, you're probably
going to have to have a identity
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card that says you've been
vaccinated. I mean, I've been
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I've been vaccinated. And when I
was the second time, the nurse
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said, take a picture of this
card with your cell phone and
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carry it with you, that shows
that you're vaccinated. Well,
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I've got the card, I've also got
the picture.
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Which jobs or industries do you
think will go extinct in the
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next five years because of the
pandemic?
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I don't know that the pandemic
itself is going to force any
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into extinction. But the trend
toward bricks and mortar stores,
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going out of business will
probably be speeded up, we've
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seen that now with a pandemic
because, you know, ordering from
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home has been speeded up. And
it's one of the things you get
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used to it. I find myself
ordering stuff on online that I
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would have gone to a store, but
I go hey wait a minute I can
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order this, and two days later,
maybe even tomorrow, I've got it
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on my doorstep, and I don't have
to go out to malls. Again, it's
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nothing new, they're already in
trouble, you know, online is now
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I think 24% of total retail
sales. And this is going to
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further increase the demise of
malls, a lot of malls are really
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dependent on on restaurants as
anchors. And you know, if people
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really get used to more ordering
in food and so on, that's going
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to affect their their business
as well. So I think it's, it's
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more a feeding off of existing
trends rather than anything
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completely new, that's going to
cause difficulty.
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Different topic, but kind of
looking at the future of cities.
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How is commercial real estate
going to adapt to the post COVID
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world? And are we done with
these big flashy city
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headquarters?
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Well, I'm not sure I want to be
in that business of owning them.
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Yeah, I think there's gonna be a
lot of pressure on commercial
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real estate, people probably
sharing desks, not need as much
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office space, as before. By the
same token, you're getting an
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offset and people with bigger
houses, bigger houses, and maybe
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more suburban office buildings.
But I think it's going to be a
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lot of pressure on commercial
real estate in very expensive
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major cities. Now these things
go in cycles after World War
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Two. You had, the huge
development of the suburbs. And
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then of course, more recently,
you go back about 10 years ago,
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and younger people, millennials,
they wanted to be in the city
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they wanted to be where the
action is a lot of them didn't
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even have driver's licenses,
they wanted to be a place they
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could walk to work to stores,
shops and theaters, etc, etc.
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Now you've got it swinging the
other way. I don't think you
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would say that these major
cities are dead. But I do think
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that they're probably going to
have to be some major changes
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for them to again, become
attractive.
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Where do salaries go from here?
Are we going to see compensation
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to our highest earners plummet
as companies no longer pay a
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premium to employees who live in
higher cost of living cities?
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People are allowed to work in
much cheaper locales. Now, that
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doesn't necessarily mean though,
that they're paid less. Salaries
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are really ultimately based on
cost of living. And if you have
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people moving out of expensive
cities into cheaper areas is
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probably going to put downward
pressure relatively on wages.
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However, having said that, we're
probably in a cycle now where
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labor is gonna do better than
capital. This this, you go
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through periodic cycles. So we
look at charts of profits, share
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of national income, as opposed
to labor compensation and their
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mirror images. And neither side
gets the upper hand. And
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definitely you wouldn't expect
that in a democracy. But capital
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profits have had a very high
share relatively in recent
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years, it's starting down labor
share, I think is probably going
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to increase, I think, probably,
in general, at least on the sort
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of the blue collar level, you're
probably going to see higher
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real, real incomes.
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What's the future of child care
and schooling in our country?
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And are we about to see a major
disruption there?
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What happens typically, when you
get traumatic situations is that
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fertility rates drop. And that,
no doubt, we will see that
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revealed in in coming months,
coming quarters, a lot of people
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simply had to postpone child
care, child rearing, child
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birth, marriages, and so on and
so forth. There may be a lot
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more emphasis on childcare,
government supported childcare,
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but I'm not sure that that's
going to make a huge difference
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in terms of birth rates,
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We've seen women fall out of the
workforce at a much higher rate
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because of the childcare crisis.
Does this trend persist post
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COVID? And should the government
be stepping in to fix it?
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If you look at the labor
participation right? Now, this
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is a percentage of people who
are either working or actively
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looking for work, that labor
participation rate for men in
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this country has been declining
throughout the whole post war
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period, women rushed into the
labor force starting back in the
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60s and 70s. But actually shy
about 10 years ago, their
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participation rates peak and
they started down, I think,
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right now, they they have gotten
a further push down with a
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pandemic, and the necessity of
staying home to take care of
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children, and so on and so
forth. So we probably are going
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to see a continuation of these
trends. Now what has filled the
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gap in this country is
immigrants. And I think it's
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probably going to help this
country in an era when when
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birth rates are declining.
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Are we going to have a stronger
economy in 2021, than we did
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before the pandemic hit?
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No, it doesn't look that way. It
doesn't look that way we're
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making back making up part of
the shortfall, obviously. But it
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looks to us as though economic
growth this year is going to be
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muted. And the facts are that
all this money that's been
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pumped out and into individuals
a year ago, back in December,
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and now more recently, it's not
being spent, it's been saved. A
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year ago, all that money went
out consumers save 71%. And
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what's interesting is people in
the bottom of the income heap,
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were the biggest savers. A
survey show that 16% of
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millennials don't have 400 bucks
for emergency. So you expect
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them to spend spend it all, but
they saved it. So I think that
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we're going to see a much slower
economic growth as we move
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through the year, and it's gonna
disappoint a lot of people,
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including, including equity
investors. I think consumers are
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going to continue to hang on to
allow that stimulus money.
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How long will it take for the
economy to fully recover? And
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what will the shape of the
recovery look like?
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I think it'll take a couple of
years. Matter of fact, if you
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look at some of these
forecasting bodies,
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International Monetary Fund, the
Congressional Budget Office,
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which is nonpartisan, they
really don't see the economy
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getting back to where it was
before the pandemic started
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until next year, or maybe even
even later. And I think that
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very well could be the be the
case. Again, when you say
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recovery, as we talked earlier,
it isn't just sort of the total,
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it isn't the total GDP, it's
what's the composition. If
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you're operating a bricks and
mortar store, in a mall, you may
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never get back. It may just be
it may be curtains, I think
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it'll be well into next year
before we'll be back to the
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levels of total economic
activity that we had before the
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pandemic hit.
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I know sometimes people talk
about a K shaped recovery or a W
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or a U. Is there a certain shape
that you see this recovery
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taking in the next few years?
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I think you're going to see a
change in consumer spending,
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you're probably going to see
more government involvement in
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the economy, a bigger share of
the economic pie going to the
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government. That is the historic
trend, whenever there are major
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problems. Government tends to
increase its activity that
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certainly was resolved going
back to the Great Depression. As
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I say, I think consumers are
probably going to be rebuilding
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their assets and liquidity
paying off debt. Increasing
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saving means that incomes are
going to grow faster than
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spending. And again, that's
that's a factor that subdues
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economic growth.
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