If Robots Are Replacing People, Why Is There A Labor Shortage?

Historically, at the peak of the business cycle the unemployment and GDP gaps tend to be proportionate. In this cycle, however, much of the recovery in jobs will be held back. Hence economists expect a bigger (positive) gap for overall GDP than for unemployment. Thus by the end of 2022 BofA estimates a 4.7% output gap, but a smaller -0.9% unemployment gap.

In sum, robots and other labor-saving technology will not prevent a red-hot economy, an almost-as-hot labor market and upward pressure on wages and prices. In other words, BofA's previous forecast for "transitory hyperinflation" is likely to pan out.

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