Current, consumer service (hotels, passenger transport, hair salons, etc.) are growing rapidly, keeping the economy afloat. This is not surprising as consumer services such as travel and dining out at restaurants are still recovering from a complete collapse early in the pandemic. And because such services are more labor intensive, jobs continue to grow rapidly.
But this strong growth won’t last forever. As the fear of the pandemic subsides and households return to their pre-pandemic spending patterns, the pace of recovery in consumer services will slow and by 2023 employment growth in the sector will no longer be unusually high. With consumer spending on services accounting for about 45%, US economya slowdown in this segment could lead the economy into recession, especially if the rest of the economy continues to contract.
Impact of rising interest rates
In its fight to contain inflation and slow the economy, the Federal Reserve will continue to raise interest rates sharply. Sectors that are sensitive to rate hikes, such as the housing market and auto sales, will be hit. Housing construction starts When saleFor example, it is already in serious contraction and will continue to decline. mortgage interest rate Stay exalted. In addition, rising interest rates tend to lower stock prices, reducing household net worth and spending.
Labor shortages will persist over the next decade
Labor shortages are not just a temporary problem, they are the result of long-term demographic and labor market trends converging on the pandemic.
First, as baby boomers retire, working-age Population growth slowing down. Second, people in the 25 to he 34 age group, especially men without a college degree, are more likely to graduate from college. Labor forceThey are far more likely to be single and live with parents Less need for income.
Third, for decades, people under the age of 25 have Labor force Enroll higher educationAnd the last few decades have seen a significant increase in the percentage of people who have opted out Labor force because of disability.
The pandemic has further reduced labor force participation, especially among the elderly and those fearing infection or suffering long covidAlso, the new flow is immigration From 2018 to 2021, increased government regulations and the pandemic further slowed the supply of available manpower, significantly limiting dispatches to the United States.
Worker productivity could have offset stagnating workforce size, but over the past decade Productivity profit, and pandemic did not bring any improvement. A tight labor market will continue to push wages higher over the next five to 10 years, and the resulting price pressure will force the Fed to keep rates higher than usual.
This has created an economy in which strong job growth and low inflation cannot coexist. One or the other, as a significant increase in employment in an ultra-tight labor market would accelerate wages and thus prices. In such an environment, economic and employment growth is expected to slow down over the remainder of the decade.