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Written by: Tim Pierotti
Yesterday, I flew back from two days in North Carolina where I had a speaking engagement. All in, I took four Uber rides, to and from the airport coming and going. I am someone who always makes conversation with the Uber driver. While probably not the most gregarious guy you’ve ever met, I am intrigued by people’s stories and specifically their career choices and trajectories. I ask a lot of questions and have yet to find the driver that wasn’t happy to talk about themself. Obviously, the ethnicities, the backgrounds, and the stories of drivers are no less diverse than America itself, but I have been struck that so many drivers fall into two cohorts: the semi-retired with assets and savings and secondly, the young underemployed kid struggling to keep up with the rising cost of living.
For my NC trip, I had two of each. There was the retired executive from a multibillion retailer who owns a rental property in Florida. Unwilling to be transferred again by his former employer, he chose to stay in the Blue Ridge Mountains. He drives to avoid cutting into savings and to have extra cash to help his young adult children. To him, the economy seems pretty strong. Similarly, another driver in his late fifties sold his lawn service business a few years ago, owns his home free and clear and chose the gig lifestyle to have more time to coach kids and watch his sons play HS and College baseball. He said to me, “I don’t need to keep up with the Jones’s and my house is worth more than I ever imagined.”
On the other hand, I had a young driver who had a college degree from a private college and the student loans that came with it. His rent is up 20% y/y and the interest rate on his car payment was 9%. He and his wife, a teacher, were trying to save to buy a home but the idea of doing so seemed impossible where they lived, so they were considering moving to somewhere with a cheaper cost of living. He drove full-time to keep up with expenses and was worried that his resume was becoming a problem. Lastly, I was picked up by a young man who worked full-time in what sounded like skilled labor but supplemented his income with an extra twenty hours a week with Uber. His rent and the frustration of not being able to buy a house was the first thing he said when I asked about the local economy.
Economic analysis via anecdote is generally something to avoid, but the data support the stories. In regard to the “semi-retired” drivers, last November I wrote an essay titled, “The Disillusion of the Grindstone”, which discussed the phenomenon of men in their late forties and fifties choosing to work part time.
I quoted a study done by economists at the St. Louis Federal Reserve whose analysis revealed, “The most productive workers in our society, those who work the most hours and earn incomes in the highest deciles chose to work fewer hours following the pandemic. The implications of this paradigm shift could have a significant impact on US productivity, potential GDP and long-term inflation.” Additionally, consider that as strong as the economy has been over the past year, we have actually seen full-time employment shrink while part-time employment has grown rapidly and much of that is due to workers choosing to work part-time.
The housing affordability issues about which the young drivers lamented are also well-supported by the data. Housing affordability is worse than the years preceding the run-up to the housing driven Great Financial Crisis. Recently, all cash homebuyers outnumbered first-time home buyers for the first time in modern economic history.
The term many economists and market-observers have used about this post-pandemic period is “The K-shaped recovery”. For the part of our society, usually people over-forty, who own homes and have invested in 401K’s, the rise in wealth has more than offset inflationary pressures. For everyone else, while we have fortunately seen strong wage growth, painful inflationary pressures mean that the American dream of owning a home and growing a family seem unattainable.
Related: Unpacking the Crucial Role of Productivity in Shaping Our Economic Landscape