Aftershocks: 3 Macro Trends Currently on Pause
Back in early April, I was discussing with some friends how much life had changed since stringent social distancing procedures began just weeks before. We speculated that quarantining and social distancing would have many unintended consequences—spilling into every part of life from how we dress to how we travel—ultimately altering how we function as a society. We agreed that three big macro trends, which at one time all felt unstoppable, were going to hit the pause button: globalization, urbanization and the sharing economy.
Despite obstacles in recent years arising from disagreements over economic fundamentals and shifting policy, globalization’s strong momentum has barreled forward. But, when COVID-19 hit and the global economy became immediately restricted, this pause exposed the vulnerabilities of the inter-connectedness of supply chains across countries and continents. The flow of global trade slowed, borders closed, travel restrictions increased and many called for American companies to reshore production.
In September, top economists spoke with CNBC about their predictions on globalization’s future. As expected, opinions varied. Chief economic adviser at Allianz Mohamed El-Erian expects “less globalization with less dynamic productivity and higher industrial concentration,” while others foresee shifts in international collaboration. Although global trade has since rebounded from its pandemic-hit lows of this spring, questions remain on whether the events of this year will leave us in a less globalized state. Regardless, this opens up the conversation, as well as opportunity, to remodel our approach to globalization to safeguard us in the future.
Over the past four decades, the number of people living in cities “has more than doubled to over 4 billion people today,” according to Wharton. This year that number has reversed—cities have faced a mass pandemic-driven exodus to suburban and rural locations. The New York Times reports that between March and May approximately 420,000 people left New York City.
These moves are now becoming permanent as many who had been looking for homes in the city have completely shifted their focus to the suburbs instead, in hopes of finding more space and a less densely populated environment. I expect third- and fourth-ring suburbs will see demand as people factor commute time less and less with their increased ability to work from home. This urban flight will cause intense reverberations—commercial real estate and city transportation, for example, will face major questions down the line.
The sharing economy is an economic model that had been growing rapidly up until this year. This includes incredibly popular brands, such as Uber, Lyft, Airbnb and Rent the Runway, that involve individuals renting out or sharing their personal property. Unsurprisingly, these businesses saw a dip when social distancing measures took place. People were, understandably, conscious of the health risks associated with other people and unsanitized spaces.
According to Business Insider, by May both Airbnb and Uber had each laid off about a quarter of their workforces, and Uber had seen rides decrease by 80 percent at one point. Consumer confidence is starting to rebound and some rent-by-the-hour services are seeing an uptick in usage. We will continue to see changes in these categories as entrepreneurs and companies alike look for socially distanced solutions.
These trends paused because of this pandemic. We must be open to these larger changes and take our best guess at what the resulting aftershocks will be, so we are best equipped to react immediately and are prepared to manage the consequences.