Even though it may not seem like there is a global labor shortage because of the enormous unemployment rates we see, there is. This may be even more exacerbated if geo-political tensions and developments around COVID-19 continue to hamper and act as a regressive force on globalization. When there are not enough workers, one thing that will inevitably happen on a macroeconomic level is that managers will seek labor solutions that reduce, to the extent it will boost profitability, reliance on human labor. This tends to lead to managers using automation and artificial intelligence not to replace human labor completely but to supplement it and act as a major force multiplier. The world is short nearly a hundred million workers, and that number may increase as a result of COVID-19. In addition to the already ongoing global labor supply shortage, the pressure on many sectors of the economy to increase operating leverage can also augment and accelerate the forces that were already in motion.

Besides being a bullish harbinger for the companies that supply the cutting-edge, labor-replacing technology that will be widely needed by firms, this generally benefits the United States. After all, Silicon Valley will be one of the prime beneficiaries of this secular labor shortage. This is one of the reasons we continue to be bullish on US equities generally. We think there a few key forces that will result in the US decoupling from and exceeding the rate of growth in much of the rest of the world not possessing the same advantages like reserve currency status and deep, developed capital markets. The bottom line is that since 1970 there was a 33% worker surplus over GDP output. We predict the next 35 years will see a massive deficit and it has already begun.