Philip N Jefferson: Technology's impact on the post-pandemic
economy
Speech by Mr Philip N Jefferson, Member of the Board of Governors of the Federal
Reserve System, at the conference "Technology-Enabled Disruption: Lessons from the
Pandemic and the Path Ahead", organised by the Federal Reserve Banks of Atlanta,
Dallas and Richmond, in Atlanta, Georgia, 4 October 2022.
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Good morning, and thank you. It is a pleasure to be here today. I am happy to be giving
my first speech as a member of the Board of Governors at the Federal Reserve Bank of
Atlanta. I would like to thank the Atlanta, Dallas, and Richmond Feds for inviting me
today and for bringing together this collection of expertise and research.
Today I would like to continue the discussion you have been having about tech-enabled
responses to the pandemic. Then I would like to delve a bit further into what those
pandemic-related disruptions have meant for economic activity at the microlevel and
how the changes of the past few years affect how I view the outlook for the
macroeconomy.
This may be my first speech as a Fed Governor, but I am well aware of one practice
associated with these occasions. That practice requires me to say that I am speaking
for myself alone. My views do not necessarily reflect those of anyone else at the Board
of Governors or in the Federal Reserve System.
Technology-Enabled Solutions to Pandemic Disruptions
Turning to the subject of this conference, there is no question that technology helped
households and businesses to adapt and adjust in many ways to the disruption brought
about by the pandemic. Those adaptations-from enabling people to keep working to
helping businesses stay open-undoubtedly prevented worse outcomes. They also likely
changed the economic landscape for good and, in many cases, for the better-from
hybrid working and how businesses approach distribution, investment, and inventories
to the way consumers shop and pay for goods and services. Those changes are
evident across broad categories, each of which this conference has discussed in some
detail.
Supply chain and business investment underwent, and are still experiencing, significant
change. Large increases in computers and peripherals investment enabled remote work
and helped to automate processes at physical establishments while simultaneously
minimizing in-person contact.
Likewise, the labor market showed great adaptability in the rapidity and relative ease
that many sectors showed in shifting to remote working. Of course, that did not translate
to all areas of employment, such as those jobs that require person-to-person
interaction. Nevertheless, technology allowed many employees to continue working
during a pandemic. Also, it likely had an indelible effect on current and future ways of
working, including encapsulating hybrid work and greater flexibility for employees as
fixtures.
The shift to remote and hybrid learning, however, was difficult, but without technology,
learning during lockdown might have ceased entirely. In some cases, schools were
closed for only a few weeks or months, and the entire in-person learning apparatus was
replaced with technology-enabled remote learning. The teachers and
administratorsand I was one at the time-adapted remarkably quickly to a dramatically different set of
tools and techniques. Teachers, students, and parents made a rapid shift to an entirely
new dynamic, often on entirely new platforms. We are still learning the lessons of that
interlude, and they can influence how schools at all levels think about future planning.
My colleagues and I recently heard from a community college administrator about the
challenges she faced. Training programs that fill worker demand in local industries
require hands-on experience, which meant retooling the curriculum for a hybrid
environment. Student services also had to change to accommodate the increased need
for childcare and other pandemic-related hurdles, or her school risked a drop in
enrollment.
The payments system has also seen an acceleration in alternative online and mobile
payment methods as well as contactless payment options. We all remember the onset
of the pandemic, when social distancing became imperative and delivery and curbside
pickup became the norm for many. Remote card payments naturally rose as in-person
use fell. As stores reopened while the fear factor was still considerable, the contactless
payment options that were available on cards and mobile devices received more
attention. Such changes, coupled with the growing prominence of person-to-person
money transfer apps, provided consumers with remote and touchless cash substitutes
in their daily lives. The expanded use of those various payment options rested on the
foundation of an intricate, robust payments ecosystem. That system supported a
migration from in-person payment options to no-contact alternatives, helping restart the
economy during a time of deep stress.
These are just a few of the examples you have been discussing, and there are many
more. The pandemic, and the tech-enabled responses to it, changed the economy in
fundamental ways that will likely not revert. It is vital to understand those changes and
the effects they will have going forward.
As an economist looking at these issues on a microlevel, I appreciate the expertise on
display at this conference. From my new perch as a Fed Governor taking the macro
view, the research presented gives more context to the wider economic playing field.
From either perspective, the technology-enabled responses and the changes brought
about by the pandemic itself are important issues for policymakers to understand. They
affect how we look at the economy overall.
As I look ahead, I am considering how those changes affect the outlook, and I would
like to speak a bit about how I see the economy evolving as we move forward.
Outlook
The labor market remains strong, as can be seen across a variety of measures, from
the low unemployment rate to the high quits rate, which illustrates the confidence of
workers who are willing to leave their jobs in pursuit of better ones. Labor force
participation remains lower than it was prior to the pandemic, reflecting several factors,
including people who left the workforce for early retirement and some remaining parents
and other caregivers who stayed home through the pandemic. These are not factors
that reverse on a dime.
With still-strong labor demand and sluggish labor supply, the job market remains very
tight. Workers are moving between jobs more rapidly than in the past, putting upward
pressure on wages. In a market with more job openings than workers, the competition
to fill vacancies is leading to rapid wage gains now, and the resulting salary
compression may lead to further upward wage pressures in the future. As growth has
slowed this year, supply-demand conditions in the labor market-and the overall
economy-seem likely to ease some. We have already seen some indications from
survey data, information from transportation hubs, and producer prices that supply
bottlenecks have, at long last, begun to resolve.
Nonetheless, inflation remains elevated, and this is the problem that concerns me most.
Inflation creates economic burdens for households and businesses, and everyone feels
its effects. It can also change people's expectations about how long lasting price rises
will be. Those inflation expectations can become entrenched and, in doing so, increase
the likelihood that high inflation will persist. While oil and gasoline prices have come
down in recent months, I am concerned that fluctuations in prices of the goods to which
people pay the most attention, like food and housing, will affect expectations of future
inflation. Thankfully, longer-term inflation expectations appear to remain well anchored,
consistent with our 2 percent target. I will be watching those expectations closely.
An important outcome of the shifts you have been discussing, from firms' production
patterns and distribution mechanisms to consumers' purchasing decisions, is that
inflation dynamics likely changed also. How and why prices change require careful
study and analysis, and a data-driven approach is more essential than ever.
Restoring price stability may take some time and will likely entail a period of below-trend
growth. However, I want to assure you that my colleagues and I are resolute that we will
bring inflation back down to 2 percent. The full effects of monetary policy take time, but
in my brief time on the Federal Open Market Committee, we have acted boldly to
address rising inflation, and we are committed to taking the further steps necessary.
Implications for Policy Approaches
The fundamental shifts at the core of the economy shape my approach to policy. As we
are assessing the dynamics of the macroeconomy amid rapid changes, we will be
watching the data closely and applying rigorous analysis. My focus is on progress
toward our goal.
It is too soon to say whether the pandemic and the changes it brought-many of which
this conference has covered-are going to be permanent or ebb as time goes by. My
guess is that it is likely to be a combination of the two, with some features becoming
embedded, such as new approaches to working and contactless payments, and others
returning to something like they were before, like the preference for in-person education.
Either way, it will take time for these changes to prove themselves to be either
permanent fixtures or temporary features. Research will play a key role as we try to
answer important questions. New data will help us analyze the changes to the
economy, and research will assemble the pieces of the puzzle that show the bigger
picture.
As we watch and assess developments in the U.S. economy, we will have to take into
consideration a multitude of factors, including those rooted in technology-enabled
disruption, and the strength and the staying power of the many forces that are shaping
the economy.
Thank you for your time, and I look forward to your questions.