This article was published by The McAlvany Intelligence Advisor on Friday, July 7, 2017:
Malcolm Frank is one of those rarest of futurists: He sees what’s coming and writes clearly about what to do about it. In his What to do When Machines do Everything: How to get Ahead in a World of AI, Algorithms, Bots and Big Data, Frank discusses the massive upheavals businesses are going through as they try to keep up and stay profitable.
One issue he doesn’t discuss is how to measure the new economy’s output. For most traditional economists, GDP growth is everything. The Congressional Budget Office (CBO) estimated that future GDP growth will be constrained not only by debt but by the limited supply of workers. As a result, economists are focused on the jobs reports that come out the first few days of every month, trying to understand and grasp the health of the economy.
For example, on Thursday ADP/Moody’s revealed that only 158,000 new jobs were created in June, way below the 185,000 estimated by economists polled by The Wall Street Journal. That’s down from the 230,000 reported in May, which number was revised downward from the initial May estimate of 253,000 new jobs. On Friday, the Bureau of Labor Statistics (BLS) will report its own results, using a slightly different analysis of available data, with those same economists forecasting new June jobs of about 170,000.
A closer look behind the headlines reveals a startling conclusion: the U.S. economy is awfully close to full employment and as a result there are increasingly more job openings than people to fill them. For instance, initial claims for unemployment benefits remained below 300,000 – a threshold associated with a healthy labor market – for the 122nd straight week. That’s more than two years running. It’s the longest stretch since 1970, reflecting the unemployment rate of 4.3 percent, the lowest in 16 years.
There’s another indicator of a strong labor market, too: layoffs in the U.S. are at the lowest levels in nearly half a century. In other words, while no one was looking, the U.S. economy has successfully removed most of the slack evident during its long slow recovery from the recession nearly 10 years ago.
Mark Zandi, chief economist for Moody’s Analytics, the company that helps ADP analyze the data from its 411,000 business clients (which employ nearly 24 million people), was positive about the jobs report:
The job market continues to power forward. Abstracting from the monthly ups and downs, job growth remains stalwart between 150,000 and 200,000. At this pace, which is double the rate of labor force growth, the tight labor market will continue getting tighter.
Ahu Yildirmaz, ADP Research Institute’s vice-president, also waxed positive over the latest report: “Professional and business services had the strongest monthly increase since 2014. This may be an indicator of broader strength in the workforce since these services are relied on by many industries.”
All of which prompts the question: Once all the available manpower has been hired, how can the economy grow? Is it constrained by population growth, or are there other factors involved that ADP and the BLS are missing? Here’s where Frank is helpful. He says “We are in fact on the cusp of the biggest wave of opportunity creation since the Industrial Revolution … the digital world is already transforming how we work, live, and shop, how we are governed and entertained, and how we manage our money, health, security, and relationships.”
The question for economists both inside and outside the government is: how do we measure an economy that is increasingly based on artificial intelligence, robots, kiosks, and digital information? Since robots and kiosks don’t draw paychecks, just how relevant are reports like these from ADP and the BLS?
There are more questions than answers, but some things are becoming increasingly clear. The Luddite claims that technology will put people out of business are already proving to be false. Even those put out of work thanks to the insanity of minimum wage laws seem not to be showing up in the unemployment statistics. Those who want to work seem to be able to find work, according to the jobs reports.
It appears, at least initially, that 1) the economy is much more robust than the jobs reports indicate, and 2) the economy is taking every bit of all human labor available to it to keep it humming. In a vast, continually accelerating concentric circle, technology helps humans who are needed to develop the technology and keep it running. This accelerates the need for more human input, which improves the technology. As the digital revolution accelerates, jobs reports like these issued monthly by ADP and the BLS are becoming increasingly irrelevant.
MarketWatch: U.S. jobless claims climb 4,000 to 248,000
BusinessInsider.com: U.S. private hiring slows in June, weekly jobless claims rise
Business Insider: ADP private payrolls rise less than expected