Since the pandemic began a year ago, the term “new normal” has become part of the American lexicon. Not “new” as in better or improved. But rather “new” as in contrast to the way things used to be.
Much of the mainstream discussion argues that returning to the “old” normal isn’t likely to happen. Things like pre-pandemic employment, closer-to-normal price inflation, and less economic uncertainty just aren’t on the map.
The Street summed it up generously as: “Numerous chain reaction ripple impacts will delay the economic recovery.” Some of these “ripple effects” were in motion long before the pandemic hit.
For example, the Fed was already in a state of panic thanks to an out-of-control repo rate fiasco from 2019, mounting debt, and potential ineffectiveness of its main tools.
During the “old normal” the Fed would have been able to deploy its tools to control rates and keep unemployment under control — but that might not be possible now or in the future.
Under the post-pandemic “new normal,” the potential exists for the “ripple effects” from the state closure of small businesses, developing automation, and fractures in the food supply chain to be felt more permanently.
Is the U.S. Heading for Permanently High Unemployment?
In a way, thanks to the pandemic, yes it is. But it depends on many factors.
Wolf Richter laid out why he thinks the sudden economic shifts that happened in 2020 will take years to sort out:
Now the Pandemic has forced businesses to change. There is no going back to the old normal. And these technologies impact employment in both directions.
If the pandemic has forced businesses to adopt technologies that automate certain functions, then the employees that performed those functions will no longer be necessary.
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