The Economist - USA (2021-02-13)

60 Business The Economist February 13th 2021

bythesummer,whichwouldhelpreopen

theeconomy.Citigroup,a bank,calculates

that Americans have squirrelled away

$1.4trn inunspentincomeoverthepast

year.Alltold,$5trnorsoissittingidlein

money-market funds which could be

spent—oneverythingfroma newpairof

shoestonewshares.Second,itiswidely

assumedthatDemocratic controlofthe

WhiteHouseandCongresswillmeancon-

tinuedfiscalandmonetarystimulusthat

couldfueldemandfurtherstill.

Thishasledforecasterstoprojectthat

s&p 500 revenuesin 2021 willmatchorsur-

passthosein 2019 formostsectors,accord-

ing to Goldman Sachs, an investment

bank.By 2022 everyonebarAmerica’soil-

menshouldbeinrudehealth.GreggLe-

mos-Steinofs&pGlobal,a ratingsagency,

nowforeseesa speedierrevivalinhealth

care,buildingmaterials,businessservices

andnon-essentialretail(seechart3).On

thisview,sharepriceshaveroomtosoar.

Twodangerslurk.If PresidentJoeBiden

failsto getsomethinglike hisproposed

$1.9trnstimulusthroughCongress,inves-

torsandbossesmaystartpanicking,re-

gardlessoftheviewsofeconomists,many

ofwhomworrytheplanisexcessive.Given

theuncertainty overpost-pandemic de-

mandforlargeindustriessuchasairtravel,

nowthatceos canseethatZoomisoftena

decentalternative,understimulationisa

biggerriskthanoverstimulation,saysthe

bossofa bigprivate-equityfirm.

Theotherdangeristhevaccinerollout.

Americanstatesarejabbingarmsata de-

centclip;onlyBritainhasdonea betterjob

sofaramongbigcountries.Butnineinten

Americans have yet to receive a single

dose,letalonethefulltwo.Alargeshare

mayrefusetobevaccinated.Andtheemer-

genceofvirulentnewviralstrainscould

meanthetransitionfrompandemictono

pandemicwillnotbebinarybutgradual.

Americanbusinessmayneedtocopewith

amessierscenarioofpartial lockdowns

andendemicdiseaseforyears.

In 2020 a strongstockmarketsatawk-

wardlyontopofa sicklyeconomy.In 2021

theoppositemaybetrue,thinksMichael

Wilson,ofMorganStanley,a bank.There-

coverywillbe“extraordinarilyrobust”,he

believes, with both gdp and earnings

growingbriskly.But,hewarns,thestock-

markethas“already pricedintoomuch

good news”.Lastyear’s corporate cham-

pionsmayfindthattheirsalesincludeda

lot thatwerepulled forward.The strag-

glers’valuationsalreadylookrich.Disap-

pointmentisalltooconceivable.

Iftherecoveryslows,thegulfbetween

WallStreetandMainStreetmaybecome

untenable.TobiasLevkovichofCitigroup

isconfidentthatfirmswillfindopportuni-

tiesevenunderconditionsofcontinued

topsy-turviness.Asforinvestors,thebest

ones“don’ttrytopredictthemarket”,says

theprivate-equityboss.“Theyadaptquick-

ly.”Thisyearwillofferthemplentyofop-

portunitiestoshineinthatdepartment. 

Returnstohealth

S&P500*,netprofit/loss,2020,$bn

Source:Bloomberg

*311companiesthathavereported

resultsatFebruary10th 2021

2

-20 0 20 40 60

Top 20 companies

Pfizer

MorganMorganStanleyStanley

Amazon

Apple

Alphabet

Bottom 20 companies

ExxonMobil

Boeing

Chevron

AT & T

DuPont

Patientsdischarged

NorthAmerica,recoveryofcreditmetricsto 2019 levels*

Source:“U.S.CorporateCreditOutlook2021:

EconomicAndPoliticalTransition”,S&PGlobal

*ReportpublishedinSeptember 2020 †MadeinJuly 2020

3

Nodeterioration

Jan-Jun 2021 Jul-Dec 2021 2022 2023 Laterthan 2023

Tech(software)

Consumerstaples

Homebuilders/

developers

Defencecontractors

Essentialretail

Telecoms

Pharmaceuticals

Engineering/

construction

Health-careservices

Tech(hardware/

semiconductors)

Ad-supportedmedia

Restaurants

Business/

consumerservices

Buildingmaterials

Medicalproducts

Paper/packaging

Metals/mining

Midstream

Fitness

Gaming

Non-essentialretail

Oil/gas

Refining

Utilities

Chemicals

Consumer

discretionary

Power

Realestate

Capitalgoods

Hotels

Outdoor

entertainment

Automotive

Commercial

aerospace

Airlines

Cruise

Recovery

sooner than previous forecast†

later than previous forecast†

Unions v big tech

Labour coders

F

or decades America’s labour move-

ment has been losing steam. Trade

unions represent only 7% of private-sector

workers. No significant piece of pro-union

legislation has passed in recent years.

Right-to-work laws, which undermine the

clout of organised labour, have spread to 27

states. Now the union movement has been

showing signs of life in, of all places, the

technology industry.

Last month software engineers and oth-

er workers at Alphabet, Google’s parent

company, announced a new Alphabet

Workers Union (awu), to “protect...work-

ers, our global society, and our world”. The

union has not sought official status but

charges 1% of total compensation and has

just collected the first round of dues from

its 800 or so members—given their plush

salaries, a good-size pot to spend on law-

yers. And on February 8th union-eligible

workers at an Amazon warehouse in Alaba-

ma were mailed 5,800 ballots. If a majority

back the creation of a union by late March,

the facility will become the e-commerce

giant’s first unionised one in America.

Amazon’s and Alphabet’s unions seem

worlds away. The warehouse staff hark

back to labour’s blue-collar roots. The awu

looks to some as a vehicle for wokeness; it

is certainly a rarity in computing (see chart

on next page). But the two strands of

unionisation are interwoven. Google’s

coddled coders are intent on improving

conditions for lower-paid data-centre

workers and other tvcs (temps, vendors

and contractors). “No lone wolf should

howl alone without a pack,” declares a de-

veloper on awu’s website. On February 5th

the union filed a labour complaint against

Modis, an outsourcing unit of Adecco. awu

alleges that Modis illegally suspended a

data-centre worker for questioning a ban

on discussing pay.

Alphabet can afford to improve the lot

of tvcs if it has to. It can also, up to a point,

humour its progressive software engi-

neers; no serious financial harm has come

of having to abandon bidding for contracts

such as one to provide cloud-computing

services to the Pentagon, to which some

peacenik Googlers objected.

Amazon has more to lose. A good deal

for Alabaman workers may inspire others

to clamour for the same rights. Collective-

bargaining demands, on the timing of

shifts, expanding capacity or automating

jobs, may dent Amazon’s flexibility and

An old force takes root in a younger

industry