Part of life in 2020 is learning to strategically filter the data and insights distributed through twenty-four hour news cycles and real-time Twitter feeds. The coronavirus offers plenty of reasons to view the future with a cautionary posture; Professor @Nouriel and @ElerianM are two leaders I continue to follow closely. Last week an unprecedented increase in unemployment claims were announced: 3.28 million people applied for unemployment benefits, which caused @Nouriel to restate concerning conclusions based on his analysis. [I share some of his analysis in the post-script below.]
I have not noticed much analysis of the vitality and strengths of the US labor force. I did notice @WSJ post the following, though:
Amazon.com Inc. plans to hire an additional 100,000 employees in the U.S. as millions of people turn to online deliveries at an unprecedented pace and Americans continue to reorient their lives to limit the spread of the new coronavirus.
“Amazon to Hire 100,000 Warehouse and Delivery Workers Amid Coronavirus Shutdowns” March 17, 2020
Then, this morning I saw a similar theme in @WSJ, with the following content included:
The coronavirus pandemic is forcing the fastest reallocation of labor since World War II, with companies and governments mobilizing an army of idled workers into new activities that are urgently needed.
Around the world, former hotel, restaurant and airline staff are moving to grocers, online retailers and hospitals as parts of the economy are shuttered to prevent the spread of the disease—and essential goods and services are strained.
“Coronavirus Pandemic Compels Historic Labor Shift” March 29, 2020
This made me think about the anxiety expressed about technology and automation (thinking “Yang-Gang”) as well as the history of similar concerns, including 19th century Luddites and seamstresses. Indeed, there are “futurists” who, perhaps correctly, forecast incredible changes to logistics, education, finance, and medicine on the basis of automation, artificial intelligence, and deep learning technologies. It seems to me there are two primary issues in play: The first concerns the fundamental connection between labor and capital, as well as possible changes in the future between these production inputs (e.g. changes in education and training requirements.) The second issue concerns the resilience of the US labor market. How flexible is the American worker? I don’t know the answer but some data is available. I spent some time on the BLS website to take a look.
Roughly speaking, in February 2020 the US had a potential labor market of 259 million people. Of these, ~95 million opted out (for a variety of reasons,) leaving a labor force of ~164 million. Of these, 158 million were employed. Notably, this included more than 4 million people who, previously, were out of the labor market, as well as more than 1.7 million who were counted as unemployed in the previous survey. The number of people that moved from unemployed to no longer looking for work were about equivalent to the number that moved from not looking to work to looking, yet not employed (~1.5 million each.) This does not include data for individuals who changed jobs (i.e. remained employed within the month but changed employers.)
I moved the February data into a flow chart below. It is oversimplified and doesn’t deal with certain smaller flows (e.g. deaths, individuals “aging into” the model at age 16) but it shows the broad trends.
Of course, there are big questions about structural attributes of our labor markets, and we should all be grateful for the labor economists who invest their lives’ energies into analysis of our labor markets, and formulating policies to create improvements in the market to improve social welfare. Some areas of society are less advantaged by our system. Some trends are not good. There is more work to do. Overall, though, I believe that the American labor markets, and therefore American workers, are generally resilient and dynamic. (Or maybe I got that “flip-flopped” and the American workers, and therefore the American labor markets, are generally resilient and dynamic.)
It will be interesting to see how the trends manifest over the coming months.
P.S. Professor Roubini’s recent Twitter discussion from 3/27/20.
My Twitter live discussion of the Coronavirus crisis and its impact on economies, policies and especially financial markets. What is the risk of a Greater Depression? Have markets reached a bottom or is this week’s rally a dead cat bounce?https://t.co/IEebqRlBqb
— Nouriel Roubini (@Nouriel) March 27, 2020