Ask an Economist: What’s Next for the Economy?

Inflation is a big topic right now. We can expect to see a temporary spike in inflation this year, but we don’t expect it to last for the long term.

In the meantime, what's working against inflation—and which has for a long time—is you typically need wages to drive inflation, and we don't have that wage growth. Globalization and e-commerce have been and will continue to hold down inflation as well.

Many industries have already been hit hard. I think that bars and restaurants will continue to see bankruptcy problems, because even if they start to open back up, it may be very difficult to recover from the position that they already are in—especially since not every state is going to open up as fast. I also think that travel, tourism, and airlines, in general, will continue to see problems.

There is also the commercial construction industry, which has a landscape that has changed indefinitely. We've seen that working from home can be done. Apparently, in Manhattan, only about 10 or 15% of the people that used to come into the office are still doing so full-time, which will have a dramatic impact going forward for some time.

On the opposite end, the pharmaceutical industry is going to benefit. Residential construction is benefiting as well because people want new homes. And to fill those new homes, they want appliances. 

It’s been said for the last 10 years now that the “retail apocalypse” is driven largely by Amazon. I would suggest that it's not an apocalypse, but a shift. In this pandemic, people have started to use e-commerce and Amazon a lot more, so I suspect the growth rates of e-commerce are going to continue to be much greater than traditional retail.

We also have to take into consideration that at least through the middle of 2021, there will most likely still be restrictions on how many people can go to retail stores, driving more traffic to e-commerce retailers.

However, if you look through history, the world and the economy go through cycles. At some point, I think the actual brick-and-mortar store is going to start to have an appeal again. People are going to say, “Amazon's great, but I can't touch the sweater, I can't talk to people.”

Ultimately, e-commerce is certainly going to be the future, but I do think that there will be more of a niche demand for actual brick-and-mortar—it’s not going to go away.