Social distancing and remote work trends set in motion by the ongoing COVID-19 pandemic will reshape the global economy in ways far more structural than either the 2008 financial crisis or the Sept. 11 terror attacks, a former central banker told Yahoo Finance.
Ex-Federal Reserve governor Randall Kroszner — who was in Washington during both events — thinks the coronavirus outbreak is creating long-term structural changes in the economy, while reshaping certain sectors and geographies in profound ways.
The COVID-19 crisis “is going to have a more fundamental and long-run impact on the structure of economic activity than either of those two shocks," Kroszner, now a deputy dean and the University of Chicago's Booth School of Business, told "On The Move" this week.
Kroszner's view is that consumer behavior will change over the long-term, even once a vaccine becomes available. Over time, people have become accustomed to not using public transportation, and spending more time at home working remotely.
"I think there's going to be a very big change both in terms of sectors —like some of the hospitality sectors, some of the transportation sectors — as well as geographically," he said. Many of these areas of the economy have already suffered deeply, with no immediate path to recovery.
The economist pointed out that he's close to Chicago Booth's London campus, which is in the heart of the city. He’s observed that "very few workers have come back."
Krozner added: "They're staying at home. So, there's also a rebalancing of economic activity from the center city to the outer parts of cities and into the suburbs. So, jobs will be in different locations, and there will be different kinds of jobs.”
Typically, higher-paying jobs allow people to work from home more easily.
"But, if you're working in some of the shops that would typically sell goods and services to the people who would normally be coming into the city, those are typically lower-paying jobs, and you can't do those from home. Those jobs aren't coming back. People aren't coming in," Kroszner added.
He added this creates "a real challenge" for those workers and those types of jobs.
"And that's going to take a while. People need to both potentially move to different parts of countries where there are going to be more jobs as well as different skillsets. That's tough," he said.
Julia La Roche is a Correspondent for Yahoo Finance. Follow her on Twitter.