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