Economic Commentary: Worker Retraining, India's Second Wave, Evidence of Recovery
IN THIS ISSUE:
- The Training Imperative
- India: The COVID-19 Déjà vu
- Springing into Reopening
My first job after college was in the planning department of a major retailer. When I needed data to assemble a sales forecast, I was told to inquire with the accounting department. Entering the area was like passing through a time warp: rows and rows of people sitting at desks, smoking and making entries in huge ledger books. It took days, and half of my lung capacity, to assemble sufficient history.
By the time I left two years later, that room was empty. A computer-driven general ledger had been introduced; the number of bookkeepers had been drastically reduced, and the nature of work for those that remained had dramatically changed. I could write queries on a computer terminal that would harvest information almost instantly, saving me time and allowing a little more breathing room.
I often wondered where all of the accountants had gone. Some retired; back in those days, pensions were generous and fully funded. But others learned how to use spreadsheets and became financial analysts. That kind of transition happens frequently as work evolves; adjusting successfully is critical to economic performance.
Labor markets were struggling to keep pace with change before the pandemic, and change is likely to accelerate as the pandemic passes. Questions about how our economy can adapt, and who should pay for it, have moved front and center.
Pre-industrial economies functioned on basic skills. While there were a handful of experts in agriculture, navigation, metallurgy and other disciplines, the vast majority of workers performed physical tasks that required little training. Workers left the workforce when they were too old or infirm to keep up with the work; retirement was not a common practice, with the end of natural and working lifetimes closely associated.
Physical, repetitive labor has long been vulnerable to obsolescence at the hands of technology. But in the past two decades, a broadening range of service occupations have also been affected. Studies have shown that components of service jobs, and even the jobs themselves, are being automated at an accelerating rate. Mismatches of skills between workers and open positions have been proliferating.
The pandemic will accelerate labor-saving initiatives.
Renewing human capital is as important as renewing physical capital.
As a result of this lighter touch, the direct economic hit from the second wave will likely be less severe than the first. That said, the impact will be significant. Fresh restrictions will be particularly damaging for consumer sectors, which were only beginning to catch up with the recovery in manufacturing and investment.
Unemployment was already a major economic issue before the pandemic hit; labor markets are set to face another round of disruption as daily-wage earners and low-paid workers are starting to flee the cities. According to a Centre for Monitoring Indian Economy report released last September, approximately 21 million salaried jobs have been lost. Income inequality, already the highest among major economies, could worsen further; the pandemic pushed 75 million people into poverty in 2020.
India must ramp up its vaccination program if it hopes to avoid another national lockdown.
Economic data has yet to show a significant impact from rising infections. Goods & Service Tax receipts, retail payments, and auto sales continued to grow robustly last month. However, there are early signs that growth has started to stagnate. Both manufacturing and services surveys softened in March. Electricity consumption, the earliest data available for April, also fell in the first two weeks of the month.
Monetary policy remains accommodative in India. But the absence of significant direct fiscal support, partly due to financial constraints, could place India’s economic recovery at risk. Leaving businesses open to sustain commerce, however, could place India’s public health at risk.
The next few weeks will be critical, as the renewed COVID-19 surge challenges India’s resolve. Policymakers will have to ensure that defending economic vitality does not lead to an even higher tally of lost human lives.
Back To Life
This year, we can dispense with the usual tropes about the economic signs of spring. While it is nice to see the slow emergence of green shoots, what is happening in our flower beds is no metaphoric match for the rapid growth we are witnessing in business activity.
Looking around the U.S., indicators are bursting through recent peaks. Starting in late March, coincident with many spring break weeks, airport passenger screening volumes reached their highest levels since the 2020 shutdown. Though business travel may be slow to recover, leisure travel is thriving.
People are returning to restaurants, as well. Reservation platform OpenTable’s statistics show progress toward pre-pandemic levels of activity after a winter slowdown. Tourist destinations like Miami and Las Vegas are leading the recovery. OpenTable allows a global comparison: Australia’s cities appear to be thriving after a successful quarantine, while slow readings in countries like Germany tell a story of lingering lockdowns.
Everywhere you look, activity is brisk.
Small businesses are gearing up for additional business. In its quarterly Economic Average report, consumer review site Yelp found resurgent reopenings of restaurants, bars and gyms. Consumer search activity on the site bears out a shift in interests: group activities like boat and bus tours are getting clicks, along with child care providers as parents prepare to leave home again. Meanwhile, some of last year’s hot retail items, like fitness equipment, have lost momentum.
Spending patterns also show recovering activity. Credit card usage tracked by Affinity Solutions showed that retailers have entered the year with strength, as consumers express pent-up demand and use their pent-up saving. Of note, the category of hotel and food services is approaching a return to its normal levels after languishing for a year.
It is still too soon to say the pandemic is behind us: Variants are spreading, and sectors like international travel will be slow to rebound. But we can see in the data, and in many of our communities, that consumers are ready and willing to help the recovery reach full bloom.
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