Listening to the so-called experts, both in and out of government, who opine these days about the present and future state of the economy, can leave your head spinning.
For every self-described expert who says that the economy is strong, there is another who will say that we are headed for a deep and long-lasting recession.
Well, here’s our view: No one knows what they’re talking about because these are unprecedented times for which there is no ready comparison to any other period in the modern era.
Today’s labor shortages, in every industry from trucking to aviation to hospitality to health care to teaching and more, have not been seen since WWII, when millions of American men and women went off to fight the war and women filled the slack to meet our war production needs.
But today, there is the added twist that many of these jobs are highly-skilled — such as airplane pilots, nurses, doctors, and teachers — that require specialized training and college degrees.
The housing shortage is reminiscent of the immediate post-WWII era when servicemen returned home to start families and there was nowhere to live. Back then, the government built public housing for veterans and their new families in every community and also offered low-interest mortgages for those who wanted to buy a home pursuant to the GI Bill (which also helped pay for a college education for vets). But there is no ready answer today to negate the housing shortage, which means that home prices and rents will continue to soar.
The continuing after-shocks of the pandemic, most notably the hastened retirement of millions of Baby Boomers, likewise are unprecedented for the simple reason that we never have experienced a pandemic event in the modern era. The Baby Boomers continue to have an outsized effect on the economy, as they have from the day they were born — but in a reverse direction.
Inflation is higher than it has been in 40 years, but the Fed’s ability to tame rising prices via higher interest rates is minimal, thanks to the unprecedented disruptions in supply chains and shortages of many natural resources caused by the pandemic and enhanced by the war in Ukraine (the first major war in Europe since WWII).
Then we have to consider the effects of climate change — the droughts, wildfires, and major storms — that have the collective impact of creating shortages that ripple throughout the economy and which will only get worse.
In short, none of the textbooks that these economic experts studied when they got their degrees taught them anything about today’s economic environment. If the economists are looking for comparisons from previous eras, the appropriate box to check is, “All of the above.”
In short, we are in uncharted waters and, in the words of the ancient Greek philosopher Socrates, the only thing we know is that we know nothing.