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Seeing labor shortages as an opportunity

 

There is a shortage of labor in many countries. However, this should not be seen as a crisis, but as an opportunity to make up for lost ground in a phase of low unemployment. Social innovations are needed to make working conditions more attractive or to improve childcare. In this way, the compatibility of work and family can be promoted or older people can be better integrated into the labor market. Economic innovations are needed to increase productivity and enable higher wages. It is not certain, as is often argued, that there will be a permanent shortage of labor due to demographic change. After all, it is quite conceivable that such a permanent labor shortage could be reduced either through closures, relocations abroad or poorer quality in the healthcare sector, for example. However, it would be much better if labor shortages could be reduced through higher productivity and better working conditions.

A few years ago, we often read that artificial intelligence would take away our jobs and make many of us unemployed. Now the headlines in many countries are suddenly dominated by a shortage of skilled workers, which is expected to continue for years to come due to demographic change. Recently, the economic upturn following the coronavirus pandemic, together with demographic change, has led to even more widespread shortages of skilled workers – particularly in technical professions, but also among teachers, for example. The shortage extends across many qualification levels, so there is also talk of a labor shortage. This also includes professions that do not require vocational training or a degree.

The current situation is far too often referred to as a problem or crisis. In fact, not being able to fill vacancies with suitable people for a long time is a major challenge for the sectors and companies affected. But for society as a whole, a dried-up labor market can have many positive aspects and is much better than a situation with high unemployment. Most people do not have to worry about becoming unemployed when there is a shortage of labor. Wages and working conditions usually improve (although not automatically) when unemployment is low and employers need to become more attractive. Efforts to improve the work-life balance or to better integrate older people into the labor market are increasing.

Improve working conditions…

The labor shortages should therefore be seen as an opportunity to tackle improvements in the labor market even faster. Even if some work is already underway, there is still a need for action to make work more attractive and pleasant. Significant progress has been made in many countries in recent years in terms of reconciling work and family life. However, there are still gaps. Many parents – mostly women – therefore work less than they would actually like. Better working conditions also include integrating older people more strongly and flexibly into the labor market. Here, too, there has been some progress in recent years, albeit rather modest in some cases. In particular, making work more flexible – especially in terms of location and time – can help to increase labour market participation. In addition, professions with a shortage or bottleneck of skilled workers should become more attractive, especially for young people who are faced with the decision of which area they would like to complete their training or studies in. Care or training professions are an important part of the social infrastructure. Work in these professions has often become more intensive in recent years, which has led to more stress and cases of burnout. Even more effort is needed than before to make these professions more attractive again so that more people want to do them and work longer hours.

Such social innovations are important, regardless of the shortage of skilled workers, in order to make our work more pleasant and increase intangible prosperity. However, such measures can only partially reduce the shortage of skilled workers. This is because the proposed solutions often focus too much on increasing the amount of work performed – be it through less part-time work, more labor force participation or through politically controversial immigration.

…and increase productivity

The public debate often neglects another aspect that can effectively reduce labor shortages without having to increase the amount of work. Advanced economies need higher productivity growth. In recent years, productivity growth – i.e. economic output per hour worked – has been positive in many European countries, but also in the United States, but low by historical standards. The mediocre productivity growth increases the demand for skilled workers because the same material prosperity has to be achieved with more working hours and an intensification of work. However, it is precisely this intensification of work – when we think of healthcare professions, for example – that in turn leads to more mental stress, fluctuation or part-time work.

Productivity gains would have considerable potential to reduce the need for skilled workers and make the professions in these areas more attractive, not least because greater productivity can make work more pleasant and is also associated with higher wages. It is often argued that productivity increases cannot be achieved in the care sector or among doctors, for example. In fact, the possibilities here are limited, but still far from exhausted. Nurses, for example, are too often occupied with administrative tasks or activities such as sorting medication. Technical and organizational changes could bring improvements here. Technological progress in the healthcare sector has the potential not only to lead to better care for the population, but also to reduce costs more than in the past.

Conclusion: Choosing the better way to reduce skills shortages

The shortage of skilled workers, or in some cases the current shortage of skilled workers, is unlikely to persist on a large scale in the long term. Demographic change will continue to lead to bottlenecks, because in many professions more people will reach retirement age than will be newly trained. However, a permanent shortage of labor or skilled workers is unlikely. After all, if there is a permanent shortage of workers, production will be reduced, activities will be relocated abroad or services will be cut back in the healthcare sector, for example. However, it would be much better if the shortage of skilled workers could be reduced through higher productivity and better working conditions and higher wages in occupations with a shortage of workers, which are desirable anyway. Social and economic innovations must complement each other and would thus also help to secure prosperity.

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Global economy faces a difficult winter half-year

The global economy expanded solidly in the second quarter of 2023, but without much momentum. Almost everywhere, economic development continued to be held back by higher interest rates and still elevated inflation rates. However, there were clear differences between the individual economic areas. Gross domestic product expanded quite robustly in the United States, thanks in part to fiscal packages to promote investment in semiconductor production and renewable energies. The economy also grew significantly in Japan and major emerging economies, particularly Mexico. In the eurozone and the United Kingdom, on the other hand, the economy continued to make little headway. In China, the economic recovery from the zero-covid policy was disappointing and the smoldering debt problems in the real estate sector became more apparent again.

The global economy is likely to have continued to expand only moderately in the third quarter. The differences between the individual countries and economic areas are likely to remain large. Overall, there will be little growth impetus from the advanced economies. In the early summer months, industrial production and retail sales have mostly been subdued, with the situation in the United States and the advanced economies of Asia looking better than in the euro zone and the United Kingdom. In Europe, the energy crisis has not led to the deep recession often feared; however, the consequences are reverberating and slowing economic momentum.

I expect Europe – especially Germany and the United Kingdom – to experience a recession in the winter half-year. The purchasing managers’ indices, particularly for industry, have recently remained well below the expansion threshold of 50 in many places. The outlook for services, where corporate sentiment is somewhat better, is more favorable. In addition, consumer confidence has brightened somewhat in recent months. In view of somewhat lower inflation rates, household consumption should receive a boost and provide at least some momentum for economic development in most countries. Stronger expansion is expected in most emerging countries. The Mexican economy, for example, is benefiting from efforts by American companies to shift production and the sourcing of inputs away from China. The Brazilian economy is likely to continue to be supported by strong exports of agricultural goods. The Chinese economy, on the other hand, is weakening and is likely to expand only slightly. In addition to the disappointing recovery after the pandemic, high debt levels, particularly in the real estate sector, and trade and geopolitical conflicts with Western countries are weighing on the Chinese economy.

In the current year, monetary policy in many advanced economies – with the exception of Japan – remains restrictive. On a month-on-month basis, inflation rates are gradually approaching the inflation targets of the central banks or, in some cases, are already within the target range. However, year-on-year core inflation in particular – i.e. inflation excluding energy and food prices – is still significantly higher in many economic areas. The central banks are unlikely to lower interest rates until they see price stability guaranteed on a sustained basis. In addition, the decline in inflation is likely to slow temporarily in the third quarter in view of the recent rise in oil prices.

In 2023, average inflation in most advanced economies will still be well above the targets set by the respective central banks. In 2024, however, inflation will approach the targeted rates and reach or even fall below the target range by 2025 at the latest. The interest rate hike cycles of the central banks are now likely to slowly come to an end, and interest rates thereafter will remain at a high level for the time being. The first cuts in key interest rates are expected in the USA and the eurozone from 2024.

Monetary policy is also restrictive in many emerging countries. However, inflation rates and interest rates are now likely to have peaked in these countries as well. In Brazil, interest rates were even lowered slightly at the beginning of August. In India, however, inflation is expected to pick up slightly again temporarily due to poor harvests. In China, the situation is different. The weak recovery following the abandonment of the zero-covid policy and the smoldering real estate crisis are weighing on domestic demand and dampening price developments.

Fiscal policy will provide little stimulus to the economy in the forecast period. The fiscal policy measures to cushion the economic impact of the energy crisis last winter have already largely reached companies and private households. The support measures adopted during the Corona pandemic have largely expired. Stimulating effects on the economy are coming from medium-term investment packages adopted in the EU (NextGenerationEU) and the USA (Inflation Reduction Act, Chips Act and other infrastructure measures), in particular to accelerate the ecological transformation and the production of semiconductors. Against the background of high interest rates and quite favorable economic development, no extensive fiscal packages are expected in emerging countries either.

In view of slowly declining, but mostly still high, consumer price inflation, a restrictive monetary policy and little fiscal stimulus, the global economy will continue to expand only sluggishly. The labor market, which is robust in many places for the time being, is having a stabilizing effect. Many people do not currently need to worry about losing their jobs, which is supporting private consumption. In the current year, emerging markets will account for most of the world’s growth.

In the remainder of the forecast period, economic development in the advanced economies is unlikely to gain further momentum for the time being. A strong upturn is not in sight; initially, many countries, particularly in Europe, are likely to experience a recession in the winter. The USA could slip just short of a recession. Only from 2025 onwards do my models point to higher growth rates again, albeit with a high degree of uncertainty.

All in all, I expect the global economy to grow by 3.7 percent in the current year 2023. In 2024, growth will weaken somewhat to 3.5 percent due to a weak start. In 2025, the global economy is expected to grow again somewhat more strongly at 4.0 percent.

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U.S. Economy: robust so far, but cooling ahead

The U.S. economy expanded a fairly solid 0.5 percent in the second quarter of 2023 compared with the previous quarter (annualized 2.1 percent). While private consumption increased only moderately by 0.4 percent, business investment expanded strongly by 1.5 percent. This strong growth was probably also due to massive government subsidies for semiconductor factories and renewable energy production. Residential investment continued the downward slide that began about a year ago. Interest rate hikes by the US Federal Reserve have made financing these investments more expensive. However, the bottom is now likely to have been reached gradually. No positive stimulus for the US economy came from foreign trade in the second quarter of 2023. In the wake of weakening global trade, both exports and imports were down, with exports declining even more sharply.

The performance in the first half of 2023 was solid, but the economy will now cool. I continue to be a bit more pessimistic in the near term than colleagues of mine. The U.S. economy should continue to expand solidly in the third quarter, albeit without much momentum. Private consumption is likely to increase slightly; this is indicated, for example, by retail sales, which increased at the beginning of the summer. Consumer sentiment has also improved recently. However, sentiment indicators are still well below pre-pandemic levels. Among companies, sentiment in the service sector is significantly better than in industry, where assessments of the business situation have deteriorated. The Purchasing Managers’ Index for industry remained well below the expansion threshold of 50 in July. In view of the weakening global economy and worsening financing conditions, industry will not provide any stimulus for the US economy for the time being. Stronger growth is not expected here again until 2024 and 2025, when the global economy is expected to grow at a slightly higher rate.

The US economy is also expected to expand moderately over the rest of the forecast period. Private consumption is likely to continue to grow steadily, but higher growth rates are not expected until the second half of 2024. Although the situation on the labor market is still good, it has gradually cooled somewhat. This trend is likely to continue. The unemployment rate will rise somewhat. Household consumption is also dampened because household savings accumulated during the pandemic have declined sharply. Business investment is likely to continue to grow, also in view of the government stimulus programs, but at a less dynamic rate than in the first half of 2023. The only moderate growth in private consumption and the less dynamic global economy will also leave their mark on business investment. Towards the end of 2024, gradually falling interest rates should improve financing conditions and stimulate companies’ willingness to invest.

Fiscal policy is unlikely to provide either a tailwind or a headwind for the U.S. economy over the forecast period. The Congressional Budget Office expects the federal budget deficit to remain above five percent of economic output until 2025. The Inflation Reduction Act passed in the summer of 2022 and the Chips Act for the expansion of semiconductor production and renewable energies are expected to continue to have a noticeable positive impact on the economy. Monetary policy has rapidly become more restrictive since spring 2022, which has also curbed inflation expectations in particular. Inflation has also been gradually reduced thanks to a calming in energy and food prices in the fall and winter. In June and July, both headline inflation and core inflation, which excludes energy and food prices, were around the central bank’s average two percent target. However, in view of the somewhat higher oil price and nominal wage increases again, inflation is likely to rise again a little for the time being. Against this background, the U.S. Federal Reserve will probably raise interest rates once again by 25 basis points and then leave them at the current level until the end of the year. The first slight interest rate cuts can be expected from spring 2024.

All in all, the US economy will probably expand by only 1.7 percent in the current year. Growth in the US economy will also be only moderate in 2024 and 2025. Growth rates are likely to be 1.5 and 1.9 percent. Inflation will still be significantly elevated on average in 2023, but will be within the central bank’s target range in 2024 and 2025.

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U.S. Economy: Slowdown ahead

The U.S. economy has been robust so far and grew strongly in the summer. However, there is now likely to be a slowdown.

In the United States, economic output in the third quarter of 2023 grew strongly by an annualized 5.2% compared to the previous quarter (1.3% non-annualized). This strong growth was primarily supported by private consumption, which expanded by 0.9%. Corporate investment, which had risen highly sharply in the first half of 2023 as a result of massive government subsidies for semiconductor factories and renewable energy production, increased only slightly in the third quarter. The downturn in residential construction investment that began in 2021 appears to be coming to an end; at least, this is indicated by the growth of 1.5%. Both exports and imports increased significantly at similar rates in the third quarter. However, the slump from the second quarter could not be made up for. Global trade is weakening and dampening the trend in US foreign trade.

The dynamic development in the third quarter of 2023 gave rise to hopes that a recession could be avoided in the United States. However, it is still too early for that. The risk of recession remains high. In the fourth quarter, the US economy will likely expand much less strongly than recently but still at a solid XX%. This slowdown in growth is likely to be triggered primarily by weaker private consumption. Although the savings accumulated during the pandemic have not yet been used up, they are gradually running out. In addition, US student loans have had to be serviced again since October; the payment moratorium agreed at the beginning of the pandemic has expired and is likely to further dampen consumer sentiment among households. In view of the weakening global economy and the deterioration in financing conditions, industry will not provide any positive impetus for the US economy for the time being. Stronger growth can only be expected here again in the course of 2024 and in 2025 with slightly higher growth in the global economy.

At the start of 2024, the US economy will probably continue to grow only modestly. Although the situation on the labor market is still good at present, it has gradually cooled somewhat. The unemployment rate rose to 3.9% in October, an increase of 0.5 percentage points since January 2023. This is dampening private consumption somewhat. Corporate investment is likely to remain more or less constant at a high level, also in view of the government support programs. However, the only moderate growth in private consumption and the less dynamic global economy will also leave their mark on corporate investment in the first half of the year. Towards the end of 2024, gradually falling interest rates should then improve financing conditions and stimulate companies’ willingness to invest. The US economy will pick up speed again somewhat over the course of the coming year as residential construction investment picks up again.

Fiscal policy is unlikely to stimulate the US economy in the forecast period. The Inflation Reduction Act passed in summer 2022 and other support programs for the expansion of semiconductor production and infrastructure are still expected to have a noticeable positive economic impact. Uncertainties arise from the ongoing political disputes surrounding the adoption of a budget law. So far, the political players have only been able to agree on transitional solutions. The budget dispute threatens to flare up again in January 2024, which in the worst-case scenario would lead to a partial shutdown of the federal administration. Monetary policy has rapidly become more restrictive since spring 2022, which has contributed to lower inflation rates. In October, inflation was still at 3.2 percent (compared to the same month last year). Core inflation, which excludes energy and food prices, rose by 4.0% compared to October 2022. Against this backdrop, the US Federal Reserve will probably leave interest rates at their current level until the end of the year. However, I expect the first slight interest rate cuts as early as spring 2024.

All in all, the U.S. economy is likely to grow by 2.4% this year. Only moderate growth rates are still expected in 2024 and 2025. The growth rate is likely to be 1.2% in 2024 and 1.8% in 2025. Inflation will still be significantly higher at an annual average of 4.0% in 2023, but will fall to below 2% in 2024 and 2025.

In a more pessimistic scenario, I expect a growth rate of only 0.6% in 2024 following a recession in the first half of the year. In 2025, there would then be a recovery with a growth rate of 2.1%.

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The World of Work AI-ed

 

Interesting report by Talent Alpha on the Future of Work. In their report with the title “The World of Work AI-ed“, they write:

According to data in the latest Talent Alpha report, The World of
Work AI-ed, over 90% of leading service providers, as well as one-
third of all workers, are already using AI solutions. As a result,
some companies have experienced significant productivity growth.
However, AI poses enormous challenges that could lead to the
darkest scenarios. The leaders of these changes, who are
responsible for the future of the job market, are managers in
companies implementing AI. The report provides them with
knowledge, highlights good solutions and tools, and describes the
challenges facing the sector. It also offers specific guidance for
leaders on the steps needed to prepare themselves and their
employees for the new reality.

Read more here

(EBECON is a proud partner of this report)

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What caught my eye: Artificial intelligence, central bank digital currencies, growth in South Africa, and much more…

 

The new “IMF’s Central Bank Digital Currency (CBDC) Virtual Handbook is a reference guide for policymakers and experts at central banks and ministries of finance. It also serves as the basis for the IMF’s engagement with country authorities and other stakeholders.”

Growth through inclusion in South Africa (by Ricardo Hausmann et al.):

A search engine for financial data

Cracking the productivity code: policies for sustainable growth” interesting event at The Productivity Institute

Heterogeneity in parental time with children: trends by gender and education between 1961 and 2012 across 20 countries” by Nicoletta Balbo, Alessandra Casarico, Alessandro Sommacal, Evrim Altintas in the European Sociological Review:

How AI could spur a crisis of meaning” by Rana Foroohar:

How Hilton is enabling flexible work for frontline employees” by Amber Burton and Paolo Confino, Fortune:

Why Deskless Workers Are Leaving—and How to Win Them Back” by Julia Dhar, Deborah Lovich, Chris Mattey, Nick South, Tatsuya Takeuchi, and Sebastian Ullrich from BCG:

Cass R. Sunstein on why he is a liberal:

Federal Reserve Structure and the Production of Monetary Policy Ideas” by Michael D. Bordo and Edward S. Prescott:

The macroeconomic implications of central bank digital currencies” CEPR-ECB Conference 2023

Approaches to Estimating the Noncyclical Rate of Unemployment” by Presentation by Jeffrey Kling, CBO’s Research Director, at the 67th Economic Conference of the Federal Reserve Bank of Boston.

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What caught my eye: Women and work, money markets, supply chain disruptions, and much more…

 

Interesting ECB Conference on Money Markets 2023:

https://www.ecb.europa.eu/pub/conferences/html/20231109_money_markets_conference.en.html

“Myra Strober on women, work, and feminist economics”:

https://irs100.princeton.edu/podcasts/myra-strober-2023

How Fast Are Americans Drawing Down Their Pandemic Savings? “One remarkable shift during and after the pandemic recession was a remarkable rise in the US savings rate. This was was driven in part by the government spending programs enacted during the pandemic”

WORKSHOPS FOR UKRAINE: learn & support Ukraine at the same time:

https://sites.google.com/view/dariia-mykhailyshyna/main/r-workshops-for-ukraine?

Fiscal Capacity: An Asset Pricing Perspective by Zhengyang Jiang, Hanno Lustig, Stijn Van Nieuwerburgh, and Mindy Z. Xiaolan:

https://www.annualreviews.org/doi/full/10.1146/annurev-financial-110921-103651?

Economic Cycle Research Institute:

Peter Thiel is taking a break from democracy: It’s one of his many, many disappointments:

https://www.theatlantic.com/politics/archive/2023/11/peter-thiel-2024-election-politics-investing-life-views/675946/

“European business cycles and economic growth, 1300-2000” by Stephen Broadberry and Jason Lennard:

https://cepr.org/voxeu/columns/european-business-cycles-and-economic-growth-1300-2000

“Interpreting volatility in quarterly labor productivity”

https://www.bls.gov/opub/mlr/2023/article/interpreting-volatility-in-quarterly-labor-productivity.htm

Hidden Exposure: Measuring US Supply Chain Reliance by Richard Baldwin, Rebecca Freeman & Angelos Theodorakopoulos: “Our principal conclusion is that concerns regarding supply chain disruptions, and policies to address them, should focus on individual products, rather than the whole manufacturing sector.”

https://www.nber.org/papers/w31820

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German economy continues to have problems

The German economy continues its period of stagnation and slight decline. It has not grown since the spring of 2022. After the German economy contracted slightly in the third quarter of 2023. My guess is that the initially reported contraction (-0,1%) could be further revised downward. The economic outlook for the current fourth quarter remains subdued. I still expect the recession to continue. Overall, I am a bit more pessimistic for the German economy than some of my colleagues. The weakening global economy, the European Central Bank’s interest rate hikes and higher energy prices continue to weigh on the German economy. In addition, the already high geopolitical risks have increased once again with the brutal terrorist attack by Hamas and Israel’s military response.

There are no signs of a tentative improvement in the economic situation until the new year at the earliest. The industrial sector is likely to have more or less bottomed out, after the situation had previously deteriorated more and more. Incoming orders have recently increased and business expectations have risen slightly. This raises hopes of a gradual upturn. However, dynamic growth is not to be expected for the time being, partly because weak external demand is likely to continue to weigh on export-oriented German industry and higher interest rates are dampening investment.

As in previous months, the situation in the services sector is somewhat better and business expectations have recently brightened more than in industry. The gradual decline in inflation and rising nominal wages should increasingly support people’s spending mood. Low unemployment is also having a stabilizing effect. So far, the situation on the labor market has cooled only slightly despite the subdued economic development. Even though companies have become less willing to hire, demand for labor has remained robust in view of the widespread labor shortage. Services are thus being supported; however, strong growth is not to be expected. Retail sales continued to weaken recently. Overall, the German economy is proving resilient in the face of the many headwinds. However, there are many structural problems. More bureaucracy, a deteriorating infrastructure, unattractive tax rates and high energy prices are weighing on the German economy. The German economy has barely got off the ground since spring 2022. Even if there are signs of a gradual upturn, strong economic growth is not yet in sight. Overall, I am a bit more pessimistic for the German economy than some of my colleagues.

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What caught my eye: State of artificial intelligence, work from home, macroprudential policy, inflation expectations, and much more…

 

State of AI Report 2023 (published by Nathan Benaich, Air Street Capital), a great resource if you want to know what will shape our future:

https://www.stateof.ai/2023-report-launch

“If the first solar entrepreneur hadn’t been kidnapped, would fossil fuels have dominated the 20th century the way they did?” What a story!

https://theconversation.com/if-the-first-solar-entrepreneur-hadnt-been-kidnapped-would-fossil-fuels-have-dominated-the-20th-century-the-way-they-did-215300

5th ECB macroprudential policy and research conference on macroprudential policy:

https://www.ecb.europa.eu/pub/conferences/html/20231017_5th_ecb_imf_conference.en.html

“Dropbox’s CEO has a message for bosses who want workers to return to office: ‘They’re not resources to control’”

https://fortune-com.cdn.ampproject.org/c/s/fortune.com/2023/10/15/dropbox-ceo-remote-work-return-to-office/amp/

“The best books to understand the Israeli-Palestinian conflict” via the Financial Times:

https://www.ft.com/content/0bdab111-19a5-47d4-b64d-226dd7699ad0

“Inflation Expectations: Determinants and Consequences Conference” at the Becker Friedman Institute:

«Regulators must quickly find a way to manage risks posed to financial stability by the concentration of power in artificial intelligence platforms, the chair of the US Securities and Exchange Commission has urged.» 

https://www.ft.com/content/8227636f-e819-443a-aeba-c8237f0ec1ac

Annual Report of the Ethical AI Governance Group: “Let’s embrace the complexities, celebrate the advancements, and chart a course for an AI-driven future that is ethical, inclusive, and truly transformative.”

https://www.eaigg.org/annual-report-new

“Intergenerational Transmission of Inequality: Maternal Endowments, Investments, and Birth Outcomes”

https://www.nber.org/papers/w31761

“Changing Patterns of Risk-Sharing Channels in the United States and the Euro Area”: “We show that there is substantial room to strengthen the shock-absorption capacity of the EMU.”

by Jacopo Cimadomo, Massimo Giuliodori, Andras Lengyel, Haroon Mumtaz

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4592980

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German economy: The recession is here

There is no upturn in sight for the German economy. On the contrary, there is almost surely to be a recession in the second half of 2023. I expect the German economy to contract by 0,8 percent in 2023. I am somewhat more pessimistic for the German industry than some of my colleagues. The main cause for concern is industry. Subdued demand, particularly from abroad, and higher interest rates are having a noticeable impact on sentiment and business expectations. Industrial production fell further in July. At least the still high order backlog is helping many companies, even if it is shrinking as a trend. As industrial activity is weakening worldwide, no recovery is expected soon.

The situation in the services sector is somewhat better, but here too the situation is gradually becoming gloomier. Retail sales have been declining recently. Although consumer confidence improved somewhat this year, it is still at a low by historical standards. A sustained upward trend it not yet visible. There are also signs of a slow slowdown on the labor market. However, in view of the still widespread shortage of skilled workers, no dramatic rise in unemployment is expected. This is supporting the spending mood of households. The gradual fall in inflation and rising wage settlements could also provide at least some support for private consumption and the German economy in the fall, but not a real boost. I expect inflation to remain elevated in Germany, somewhat more than the consensus forecast. The upswing for the German economy is still a long time coming and is likely to be only tentative in 2024. However, despite all the problems, the German economy still has many strengths, particularly in the industrial sector, which has been battered for some time, and these will come to the fore again when the global economy recovers more robustly.

I expect the Germany economic to contract by 0,8 percent this year followed by a modest recovery in 2024, where I see the growth rate of gross domestic product at 0,6 percent.

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What caught my eye: The automation of jobs, geoeconomic fragmentation, autoworkers in the U.S., global warming, and much more…

 

“Jobs will be automated, but not because of the latest Generative AI”,

“What is more, workers with less specialised skills stand to gain disproportionately, as they can now generate content that aligns with the ‘average’ benchmark.”

https://www.oxfordmartin.ox.ac.uk/blog/jobs-will-be-automated-but-not-because-of-the-latest-generative-ai/

“Autoworkers used to be the best-paid workers in the U.S. What happened?”

https://www.washingtonpost.com/business/2023/09/22/uaw-strike-autoworker-pay/

“Countries Must Contain Global Warming While Keeping Debt in Check”

https://www.imf.org/en/Blogs/Articles/2023/10/02/countries-must-contain-global-warming-while-keeping-debt-in-check

“Geoeconomic Fragmentation: The Economic Risks from a Fractured World Economy”

«After decades of increasing global economic integration, the world is facing the risk of fragmentation. A shallow and uneven recovery from the global financial crisis (GFC) was followed by Brexit, US–China trade tensions, the COVID-19 pandemic, and a growing number of military conflicts»

https://cepr.org/publications/books-and-reports/geoeconomic-fragmentation-economic-risks-fractured-world-economy

“How a Four-Day Workweek Actually Works, From the Companies Pulling It Off”,

Interesting: “Organizations that have dipped a toe into shortened workweeks say it has resulted in happier, healthier staff, less turnover and a wave of interest from job applicants—usually with little to no loss in productivity.”

https://www.wsj.com/lifestyle/careers/how-a-4-day-workweek-actually-works-from-the-companies-pulling-it-off-1a5c0e2a?

“Why Consumers Are Mad About Inflation Even Though It Has Fallen”

https://www.wsj.com/economy/consumers/why-consumers-are-mad-about-inflation-even-though-it-has-fallen-ce39ca40?

“How climate change affects potential output: Climate change and the actions taken to tackle it will profoundly change economic activity in the coming decades.”

https://www.ecb.europa.eu/pub/economic-bulletin/articles/2023/html/ecb.ebart202306_02~0535282388.en.html

“Technological change and the destabilisation of bank deposits: Assessment and policy implications”

“The March 2023 demise of some US regional banks and of Credit Suisse suggests that, contrary to expectations, the additional regulatory frameworks introduced after 2008, notably in the field of liquidity requirements, have not overcome the problem of bank runs and the need for central banks to act forcefully as lender of last resort.”

https://www.suerf.org/policynotes/75105/technological-change-and-the-destabilisation-of-bank-deposits-assessment-and-policy-implications

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