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2020: A Year in Review

December 4, 2020

With all the economic uncertainty of the past year, it can be hard to find good news. Catch our newest TrendsTalk episode with ITR Economist Lauren Saidel-Baker for a look back at 2020, and positive outlook for 2021.

 

 

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Transcript by Rev


Hi, I'm Lauren Saidel-Baker, and welcome to this episode of ITR TrendsTalk. Now it's December, which means it's time for the year end review, look back at 2020. And quite honestly, I feel that there have been enough postmortems about what went wrong this year. That's no surprise. So instead I want to look ahead to the good. Believe it or not, there is good news coming out of certain corners of our economy. I know I'm not an optimist by nature. I am an economist after all, but I want to focus today on that good news. What are the positives that will bring us forward into the recovery in 2021?

Now, the first one is maybe a little counterintuitive, but it's actually the state of the US consumer. During the pandemic, we heard a lot about job losses, furloughs, et cetera, but believe it or not, consumer incomes actually rose during the worst of the pandemic.

A lot of that was due to government stimulus, yes, but even in the most recent data points, even after the expiration of those $1,200 checks, the expiration of the additional $600 per week in unemployment payments, aggregate disposable personal income is still higher than it was back in January and February. That's notable, especially because this additional income hasn't necessarily been spent with businesses closed, restaurants, closed, travel shut down, there really just isn't anywhere to go out and spend this money. That means that savings rates absolutely spiked during the summer. They've come back down a bit back down to earth, but we're still seeing aggregate savings in the US of about two and a half trillion dollars compared to about $1 trillion before the worst of the pandemic hit. That's a lot of dry powder that the consumer is sitting on. There's a lot of pent up demand. Once we're allowed back out, that's going to support a very robust recovery. And because gross domestic product is driven about two thirds by consumer spending, that certainly bodes well for the GDP recovery already underway.

But the other side I really want to focus on today is businesses. US businesses are incredibly resilient and incredibly creative. They found new solutions to problems that no one saw coming a year ago. In fact, some of these pandemic driven trends will stick and will result in either greater efficiencies, greater cost savings, or in some cases both. A big one is office space. Maybe we don't need all of these large buildings, all of that overhead necessarily for every business. A lot of companies have found just how profitable, how productive it is for employees to work from home.

I was having a conversation with one client the other day, and they were very concerned during the pandemic shutdowns because they need their engineers to get into customers' businesses, to measure spaces and parts and components in order to engineer the solutions that they make. They didn't think they could do that during the pandemic, until they found a technological solution. They found 3D scanners that actually are more effective than a human going in with a tape measure. So they were able to scan and have someone in their home office do that engineering work, created those solutions on the back end.

Now, one engineer can do maybe 10 of these products in a day. Whereas previously they would've had to travel for two days just to get the measurements and create that solution for one customer. That's an efficiency gain, that's a cost savings and that's something that I believe they'll keep even once they can get back onsite.

So look ahead to the good news. There's a lot to come in 2021. I know that I on New Year's Eve, when we are all bidding good riddance to 2020, I'll be raising a glass to the consumer, who's poised to spend our way through this recovery and to US businesses, to the creativity, the ingenuity that we always show through events like this. I think that's something worth celebrating. I'm Lauren Saidel-Baker for this episode of ITR TrendsTalk. Thanks for joining me. Let's talk again soon.

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Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.