Why 2024 Will Unlock the Second “Roaring Twenties”
Why 2024 Will Unlock the Second “Roaring Twenties”
The 2020s got off to a rocky start. In 2020, the U.S. suffered job losses of unprecedented magnitude as a result of the Covid-19 pandemic. In 2021, thanks to the end of the stay-at-home mandates, and a population flush with stimulus money, the economy recovered so rapidly that it overheated, creating an acute shortage of labor and rapid inflation. In 2022, the Fed responded to 40-year high inflation with a steady diet of interest rate increases, the fastest interest-rate increase cycle on record. In 2023, both the labor market and inflation have cooled, setting us up for what many economists believed was a low-probability scenario, “the soft landing.”
So what can we expect from 2024? If inflation continues to soften, and interest rates hold steady, the unemployment rate and jobless claims will likely edge upwards, until the Fed begins to cut. Once the Fed takes its foot off the brakes, however, expect to see businesses investment recover and grow. As investments in artificial intelligence, green technologies, semiconductors, cloud computing, infrastructure, and domestic supply chains pick up and bear fruit, pent-up demand for labor and business inputs will be unleashed, and the 2020s will become a decade of rapid growth and innovation, like the 1920s before.
The first “Roaring Twenties” were a time of profound economic change, rising prosperity, and cultural flourishing. At the heart of the change were two key innovations: Electricity found its way into the majority of factories and homes, and the introduction of the assembly line led to the mass production of goods like cars, tractors, refrigerators, washing machines, and radios. World War I labor shortages upended traditional gender roles and drove women to enter the workforce in large numbers.
We’re on the verge of a second roaring twenties, with a twist. Again, the catalysts will be a power source revolution and a radically more productive process for getting work done. The combination of green energy and artificial intelligence (AI) has the potential to drive significant economic growth while transforming the future of work across various industries. Just as the first world war changed societal work norms surrounding women’s work, the major emergency of our decade will have permanently changed norms around remote work and schedule flexibility, again opening up the labor market to greater participation among women, parents, older workers, and those with disabilities.
Of course, the 1920s were blighted by rising income inequality, speculative mania fueled by loose monetary policy, and worsening pollution from coal-fired electric plants—and the decade ultimately ended with a catastrophic stock market crash and Great Depression. But this time, we got the crash out of the way first, better-informed monetary policy will keep speculative excesses in check, and the new energy revolution will reduce smog, not increase it. There’s a strong chance we are poised to repeat the good of the 1920s without the bad.
Achieving the full potential of recent investments and technological developments in an increasingly supply-constrained labor market will require U.S. employers and educational institutions to do a better job of harnessing untapped talent and equipping more workers with the right skills. In the 1920s, secondary school enrollment and graduation rates increased spectacularly, but in the 2020s so far, school and college enrollment and outcomes have moved in reverse. Online training providers and employers are increasingly filling the gaps, but there is only so much they can do.
The improved quantity and quality of schooling was an important enabler of economic growth in the 1920s, and a source of reduced income inequality in subsequent decades. Similarly, improving education and training program access and quality across the spectrum will be key to boosting productivity, opportunity, and prosperity over the rest of the decade, and for generations to come. With victory close at hand in the war on inflation, improving education programs, from early childhood programs to reskilling programs for older workers, should be the top priority this decade for civil society, the private sector, and the government.
See Julia’s previous predictions here:
