Robert Shiller covers four topics on What’s Next For the U.S. Economy; Housing Market, Higher Education, Future Workforce, and Inequality.
He is an Economic Professor at Yale University, co-creator of the S&P CoreLogic Case-Shiller Home Price Index, and Awarded the Nobel Memorial Prize in Economic Sciences, in 2013.
He shares that due to COVID-19, the outlook is an unprecedented situation and therefore these are uncertain economic times. The spike in unemployment shows that people’s sentiment about business has changed but in what direction this will turn, is not so yet clear.
The three asset classes that are still highly priced are the Stock Market, Bond Market, and Housing Market; because of the belief that the Federal Reserve has lowered interest rates. However, because of the world wide phenomenon of COVID-19, at any point, any of these asset classes, there exists a possible decline in the next coming months.
In the Housing Market Robert Shiller comprises them into two different categories: the urban component and the suburban component. He forecasts that the urban component is in danger of suffering. People who choose to live in the urban areas (in the city), because it is closer to work and also the amenities of city living are walking distance. But because of the closures happening due to COVID-19 the employers are following work from home orders, which saves a lot of time and effort commuting into work, and people who have quarantined themselves in home, avoiding getting infected, will also avoid going out and spending money on entertainment. Because of this, it will cause a decline in urban living spending just to keep themselves safe. And also, people will be more reluctant into paying a million dollars for a small condo just to live in the city, creating a drop in prices in the urban sector. So people will feel perhaps more confident living in the suburban areas where there is less congestion. Again this is just a possibility of what may happen in the next coming years as a result of the pandemic in the housing market.
In the Higher Education sector, young people attending university have a human desire of constant interaction. In the 19th century when the telephone was invented, people thought that city life would end because people would be inclined to interact less, however, that did not happen because people still like to get together. Although there is an increase of enrollment of online courses, students will most likely still want to congregate together. So it is very difficult to predict how the pandemic will affect how education will be taught in the coming future.
In the Future Workforce outlook, as a result of the pandemic, unemployment is at a high. Robert Shiller explains that how we work had changed before the pandemic happened. More and more jobs have been online based. As an example the retail industry; Brick and Mortar retail shops have been closing because of an increase of online shopping from consumers. However, creating a delivery service type of business might be more lucrative. It is more about finding the opportunity in an already changing workforce industry. Adaptability is the key component in these times of change. Per the explanation Robert Shiller gives, the pandemic has only emphasized the already changed industry.
In regards to the sentiment of Inequality. Robert Shiller shares that due to the pandemic it is normal that tension arises because there are economical strains. However, at the same time that there is a sense of a wartime spirit where communities have come together. The pandemic has illustrated that there are heroic people of all races, in ordinary jobs, helping one another too. Such as healthcare workers, delivery service people, and those that work in the supermarkets as well. The future is uncertain, however due to the pandemic, it may lead to more amenable political measures that will relieve inequality.
Overall, as history has always shown and using the Great Depression in the 1930’s as an example, it was a situation that affected everyone in the world, however it affected every country differently. But because of this, new innovations were established to protect the people and the country. Ultimately these changes only helped produce a stronger economy, and he feels that through this pandemic, this too will happen.
Commentary by Jennifer Brown
Investor Relations Consultant @ Strategic Legacy Investment Group, Inc.