Illustration: Aïda Amer/Axios

Businesses are positioning themselves for an increasingly competitive landscape by doing everything they can to ramp up productivity and cast off excess costs.

Why it matters: Much of that cost savings will likely come from cutting jobs and adding new ones more slowly, as companies look to invest in new technology and what Carlyle Group's head of global research Jason Thomas calls intangibles.

  • Intangibles are things like R&D, software, patents or "inventory management technology, customer acquisition software ... to increase efficiency and dampen the practical impact from cutbacks in other areas," he writes in a new paper.

What we're hearing: "Almost every client that we deal with, irrespective of sector, is trying to drive cost down and make their products and services more affordable," Tim Ryan, U.S. chair and senior partner at consulting and tax firm PwC, said during a call with reporters Tuesday.

  • "Regardless of sector, most would tell you that they operate in a hyper-competitive sector — whether it be retail, insurance, health care — and there has been this ongoing focus and search for productivity and ways to drive costs down to be more competitive."

What's happening: The dueling realities of the U.S. K-shaped recovery not only mean that some industries and workers will suffer big losses while others prosper, it also means there are limited spoils for the winners.

  • Now fighting for a “bigger piece of a smaller pie” and unable to raise prices meaningfully — but also needing to push forward with technology upgrades and investment to compete — businesses have already begun looking at cutting back in other areas.

The big picture: Companies historically spend more money on things like software, patents and content, while spending less on employees, facilities, warehouses and delivery trucks coming out of recessions.

  • Carlyle's data show the percentage of fixed income spending used on intangibles has increased — rising following every recent recession, from 3.4% after the 1981–82 recession to 7.5% following the 2007–2009 recession.
  • The share is on pace to grow to 11% in 2020.

The bottom line: "Past increases in the intangible share of corporate outlays have been associated with slower recoveries in employment," Carlyle's Thomas says.

  • "If that relationship holds this cycle, a return to full employment in the U.S. may be much further off than the late 2021 or 2022 recovery in GDP."

Go deeper

Dion Rabouin, author of Markets
Sep 17, 2020 - Economy & Business

Retail sales return to trend after coronavirus plunge

Data: U.S. Census Bureau; Chart: Axios Visuals

One of the few economic readings sporting a V-shaped recovery is U.S. retail sales, which showed the highest monthly gains in history in May (18.3%) and June (8.4%), and grew in August by 0.6%.

On one hand: While the reading showed a significant slowdown, total retail sales in August were higher than they were before the coronavirus pandemic hit the U.S., even when excluding food services.

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Illustration: Sarah Grillo/Axios

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  2. U.S.: Total confirmed cases as of 7:30 p.m. ET: 7,074,155 — Total deaths: 204,461 — Total recoveries: 2,750,459 — Total tests: 100,492,536Map.
  3. States: New York daily cases top 1,000 for first time since June — U.S. reports over 55,000 new coronavirus cases.
  4. Health: The long-term pain of the mental health pandemicFewer than 10% of Americans have coronavirus antibodies.
  5. Business: Millions start new businesses in time of coronavirus.
  6. Education: Summer college enrollment offers a glimpse of COVID-19's effect.
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What they're saying: Trump nominates Amy Coney Barrett for Supreme Court

Judge Amy Coney Barrett in the Rose Garden of the White House on Sept. 26. Photo: Oliver Douliery/AFP via Getty Images

Democratic and Republican lawmakers along with other leading political figures reacted to President Trump's Saturday afternoon nomination of federal appeals court Judge Amy Coney Barrett to succeed Justice Ruth Bader Ginsburg on the Supreme Court.

What they're saying: "President Trump could not have made a better decision," Senate Majority Leader Mitch McConnell said in a statement. "Judge Amy Coney Barrett is an exceptionally impressive jurist and an exceedingly well-qualified nominee to the Supreme Court of the United States."