Four macroeconomic forces that are shaping the world

Four macroeconomic forces that are shaping the world around us have been revealed in a new report. 

These include demographic trends reshaping the global workforce, the structural mismatch in labour demand and supply, the rise in artificial intelligence (AI) bringing automation from the factory floor to the office, and the fraying globalisation impact on labour patterns, according to PGIM’s report, The Transformation of Labour Markets: Winners and losers in a new era. 

The research points investors to important factors to consider when making long-term investment decisions.

Shehriyar Antia, head of thematic research for PGIM, said: “Profound structural changes to labour markets were already underway prior to COVID-19. The combined effects of tighter labour supply, growing labour market mismatches, the rise of AI and the pushback on globalisation will have a major impact on growth and inflation around the world.”

The report examines the drivers transforming global labour markets and the impact for investors determining future leaders and laggards across industries, regions and countries.

It argues that when it comes to demographic trends, there is now a ‘dual ageing’ of companies and older, settled workers are dampening entrepreneurship and innovation with the US seeing a decline in start-ups.

There is a structural mismatch in labour demand and supply, which is being amplified by technology, reshoring and industrial policy, the report added. It highlights that by 2030, the US semiconductor industry expects more than half of the roles it needs will be unfilled due to a lack of workers with the technical skills to manufacture chips.

The analysis also found that AI has bought automation from the factory floor to the offices. It added that labour and tech have a complex relationship as AI both enhances productivity and replaces jobs. It argued that while it may eventually displace workers — especially in service industries such as law, finance, pharma research, and education — this will not happen imminently and to the scale current headlines are suggesting. 

The last trend the report highlighted is the fraying globalisation impact on labour patterns.

With the golden era of globalisation over, there are paradigm shifts underway which are being overlooked by investors, the analysis found. Migration, onshoring of global supply chains and the resurgence of labour bargaining power are all factors investors must consider given their potential to reshape growth, inflation, and monetary policy in this new era of labour markets. 

Taimur Hyat, PGIM’s chief operating officer, said: “Technology and trends like the reshoring of supply chains are increasingly creating labour mismatches across advanced economies. 

“This research points investors to where companies will find the skills they need to grow — an important factor to consider when making long-term investment decisions.”