2020 changed the economy in ways we can’t yet understand

National Guard troops pose for photographers on the eastern front of the US Capitol, the day after the House of Representatives voted for the second time on January 14, 2021 in Washington DC to impeach President Donald Trump.

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In an earnings call this week, Yum Brands CEO David Gibbs expressed the confusion many people feel as they try to figure out what’s going on with the U.S. economy right now:

“This is really one of the most complex environments we’ve ever seen in our industry to work in. Because we’re not just dealing with economic problems like inflation and patchwork and stuff like that. But also people’s social problems.” returning to mobility after lockdown, working from home and just the change in consumer patterns.”

Three months earlier, during a company’s earlier call with analysts, Gibbs said economists calling this a “K-shaped recovery,” where high-income consumers do well while lower-income households struggle, are oversimplifying the situation. .

“I don’t know if in my career we’ve seen a more complex environment to analyze consumer behavior than what we’re dealing with now,” he said in May, citing inflation, rising wages and federal stimulus spending that is affecting the economy.

At the same time, societal issues such as the reopening after Covid and the Russian war in Ukraine weigh on consumer confidence, all of which “makes for a pretty complex environment to figure out how to analyze and market these to consumers,” Gibbs said.

Gibbs is right. Things are very strange. Will there be a recession or not?

There is ample evidence for the “yes” camp.

Technology and finance are bracing for a downturn with hiring delays and job losses and calls for greater worker efficiency. The stock market has had a nine-month slump, with the tech-heavy Nasdaq falling more than 20% from its November peak and many high-flying tech stocks dropping 60% or more.

Inflation causes consumers to spend less on non-essential purchases such as clothing so that they can afford gas and food. The US economy has contracted for two quarters in a row.

San Francisco cable cars are back in service after the COVID-19 shutdown in San Francisco, California, United States on September 21, 2021.

Anibal Martel | Anadolu Agency | Getty Images

Downtown San Francisco doesn’t quite have the ghost town feel of February, but it still has sprawling empty storefronts, few commuters, and record high vacancy rates in commercial real estate, which is also the case in New York (although Manhattan is a lot more like it’s back to its pre-pandemic crowds).

Once again:

The travel and hospitality industry cannot find enough workers. Travel is back to near 2019 levels, though it seems to be cooling off as summer wanes. Delays are common because airlines can’t find enough pilots and there aren’t enough rental cars to meet demand.

Restaurants are facing an acute shortage of staff. The labor movement is in its greatest year in decades as store workers at Starbucks and warehouse workers at Amazon try to use their influence to extract concessions from their employers. Reddit is full of discussions about people quitting low-paying jobs and abusive employers to… do something else, although it’s not always clear exactly what.

A shrinking economy is usually not accompanied by high inflation and a red-hot labor market.

Here’s my theory on what’s going on.

The pandemic shock made 2020 a landmark year. And like the terrorist attacks of 9/11 in 2001, the full economic and social effects will not be understood for years.

Americans have faced the deaths of family members and friends, prolonged isolation, job changes and losses, ongoing illness, urban crime and property destruction, natural disasters, a presidential election that many of the losing party refuses to accept, and an invasion of Congress through an angry mob, all in less than a year.

Many people deal with that trauma—and the growing suspicion that the future holds more bad news—by ignoring decency, ignoring societal expectations, and even ignoring the harsh realities of their own financial situation. They instead seize the moment and follow their whims.

Consumers do not act rationally and economists cannot understand their behavior. Unsurprisingly, the CEO of Yum Brands, which owns Taco Bell, KFC, and Pizza Hut, can’t either.

Call it the great unrest.

How could that manifest itself? How will we look back on the 2020s in a decade?


  • Older workers will continue to leave the workforce as soon as they can afford it, spending less in the long run to maintain their independence, and stitching together freelance or part-time work as needed. The labor market remains oriented towards employees.
  • Workers in lower-paying jobs will demand more dignity and higher wages from their employers, and be more willing to change jobs or quit if they don’t get it.
  • People will move more because of their lifestyle and personal reasons than to pursue jobs. Overworked workers will continue to flee the urban environment to the suburbs and the countryside, and suburbs one to three hours away from major cities will experience a rise in real estate values ​​and an influx of residents. Committed city dwellers will find reasons to switch cities, creating more churn and diminishing community ties.
  • The last vestiges of employee loyalty will disappear as more people seek satisfaction above their paychecks. As one techie who quit her job at Expedia to work for solar energy company Sunrun recently put it, “You just realize there’s something more to life than getting the most out of your comp package.”
  • Employees who have proven their ability to work remotely will resist coming back to the office, forcing employers to make hybrid workplaces the norm. Spending patterns will change permanently, with businesses targeting commuters and urban workers continuing to struggle.
  • Those with disposable income will spend it vigorously on experiences — travel, restaurants, bars, hotels, live music, the outdoors, extreme sports — while curbing the purchase of high-value material goods and in-home entertainment, including broadband internet and streaming media services. The pandemic was a time to crouch and upgrade the nest. Now that we have all the furniture and platoons we need, it’s time to get out there and have some fun.

It is possible that this summer will be the culmination of this period of uncertainty and that consumers will suddenly stop spending this fall, sending the US into a recession. Further “black swan” events such as wars, natural disasters, a worsening or new pandemic, or more widespread political unrest can similarly crush any sign of life in the economy.

Still, some of the behavioral and societal shifts that have taken place during the pandemic will turn out to be permanent.

These signals should become clearer in earnings reports as we move away from a year ago comparisons with the pandemic and lockdown era, and as interest rates stabilize. Next, we will discover which companies and economic sectors are truly resilient as we enter this new era.

WATCH: Jim Cramer explains why he believes inflation is falling

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