In the midst of one of the most chaotic times in recent history, Friday brought some good news: The unemployment rate dropped to 16.3 percent in May, compared with 19.7 percent the month before. The Bureau of Labor Statistics had initially released lower figures, suggesting a more improved unemployment picture, but revised them after economists pointed to big errors with the data.
This improvement, however small, matches what we see in the Small Business Job Growth component of the Inc. Entrepreneurship Index, with job creation showing a slight uptick in May when compared with April. We also have hourly wages going up, although the number of hours worked per week is still not growing--they're just not shrinking at the same pace. The rise in pay can be explained in part because the jobs available are higher risk if they require physical interaction.
That people are working fewer hours is partly a function of the Great Reboot: shutting down our economy to restart it again. But the post-crisis economy will not be like the one that preceded it--we're not merely updating the software and hitting the on/off button again. The change in employment numbers is a sign of the economy's uneasy and incomplete adjustment to the Second Wave of the Great Reboot I described before. Many products, services, and jobs that could go easily from analog to digital have done so. Similarly, the ones that could be canceled quickly without extreme immediate consequences (e.g., entertainment) have been hit. As companies and people adapt to the new reality with a mix of reopening and transforming from analog to digital, the blow to jobs is softer--although it is still very significant.
At Startup Genome, we work closely with governments, startups, and researchers in many Asian countries such as China, South Korea, and Singapore. As they are ahead of the U.S. on this transition, talking with them can be a bit like looking into the future. The experience in these countries follows closely what we would expect in the Second Wave.
In my upcoming book about the post-crisis trends in technology and society that will arise from the Great Reboot, I found it helpful to think of the economy as almost two entities that are working closely together but ultimately different: analog and digital. Here is how they have been developing.
10 Years in 10 Weeks
In the analog economy, products and services like live entertainment, restaurants, and travel return, but at a lower capacity than they used to have. This comes from a mix of continued physical distancing norms and consumer caution. A meaningful portion of the new hires for May are in these industries, as they reopen but with less traffic. Las Vegas casinos, for instance, are reopening at 50 percent of capacity.
In the digital economy, transactions that used to be physical and based on human-to-human interaction go online. Part of the shift to digital will be temporary--people will still want to experience things like live concerts--but some will be permanent. For instance, e-commerce in the U.S. is now over 25 percent, compared with 15 percent in March. While this figure might decline later, it will certainly not revert to previous levels. China's figure is close to 37 percent; the U.S. will be going in that direction.
Covid-19 is accelerating the pace of change. Trends that we expected to take 10 years to become fully realized have done so in 10 weeks. For example, many stores have quickly ramped up automated checkouts and online ordering with in-store pick-up, both of which reduce jobs for retail salespeople and cashiers. That's a big deal--these are two of the three most common occupations in the United States, employing almost eight million people. Some of these jobs will be restored, but not at the same levels as before. In economic terms, capital is replacing labor. Companies will not give up the technological capacities they are building during the crisis. Similarly, consumers will not give up many of the additional conveniences provided by the digital economy.
To get a better look at what this shift mean for jobs, consider that according the Bureau of Labor Statistics, the top three most common occupations in the U.S. are:
retail salespersons (4.3 million people)
fast-food and counter workers (4 million people)
cashiers (3.6 million people)
Each of these jobs has been severely hit by the coronavirus-triggered crisis, and is at serious risk of digitization and automation accelerated by the Great Reboot.
The Fastest Recession on Record and Inflection Points
The slightly lower unemployment rate is certainly good news that should be celebrated. When first released, unemployment numbers are always estimates, but even if the final figure changes (as it already has), this is an encouraging sign. However, we should not lose sight of the big picture. The unemployment rate of more than 16 percent in May 2020 is still incredibly high: higher than the peak unemployment post the Great Recession (2007-2009) of 10 percent in October 2009 and the highest unemployment rate of the past 50 years except for the month of April.
In fact, at least in terms of unemployment, this is the fastest recession on record. While it took 22 months from the onset of the Great Recession to hit a 10 percent unemployment rate, in the Great Reboot we surpassed that number in the first full month of lockdowns.
On a recent chat with Gary Bolles, Future of Work Chair at Singularity University, he mentioned he sees the current moment as one of those times in history when we are at an inflection point, when we can actually influence catalysts to build the future that is best for society. Looking at the confluence of trends in technology, work, and social unrest, it is easy to agree with him. Let us get to it.