An annoying feature to punditry and reactions across the public discourse is the shock and confusion as to why there are so many job losses and unemployed. How could this be they exclaim. They never mention that when you close all restaurants and bars, shut down all non-essential business and bar public gatherings of over 10 people, people will be laid off. Much of this would come back with the lifting of lockdowns. The reaction is as if this is not a shock, as an unexpected global pandemic is, and is part of a normal business cycle. This is a shock. The real revelation, besides their ignorance of the current system, is that so much of the last decade has been a con in job growth.
Zero Hedge is a bit strange for a financial website, as it has superior foreign affairs reporting than economics. Despite their incorrect calls of the last 100 recessions, Zero Hedge spent the Obama recovery noticing how so much of the job growth in America was in leisure and hospitality. This is not to demean those sectors, but the tame growth of the Obama era was often found in part time employment gains and employment growth in waiters and bartenders. These were not career style jobs with high potential, providing robust earnings for a family or fostering wealth accumulation.
During the Obama era, our economy added roughly 3 million leisure and hospitality jobs. Per the BLS time series charts, in January of 2010, America had 12.9 mil leisure and hospitality workers. In January of 2020, America had 16.8 mil in those same sectors. This is not to say these are the only people being laid off, but that we must understand the numbers that were going to show up when a sector employing 17 million Americans gets shut down. Tourism is dead. Dining and entertainment is pinched. They are all legally prohibited from operating.
This points to a weird change in our economy as the service economy model aggressively became more ridiculous. Reported in 2019, Americans finally were spending more money on dining at restaurants than grocery stores. We went from making things for one another to serving each other salads. This is the driving force behind the runs at grocery stores. We have many people cooking for themselves for the first time in years. Technically, we built a culture that used a separate preparation method and distribution system for eating. We have a dislocation now that could return many people to work if our supermarkets hired proper staff for operating stores and even delivering food.
That was a job growth engine of the economy that the Obama administration shepherded after the big crash. Health care grew initially, and then post-Obamacare, the massive health care system consolidations stopped that cold. Oil and gas due to the shale boom on private land helped where it could. This is why the small gains in manufacturing when Trump took office were different. Those gains for Americans on the lower end of the wage spectrum made for such weird reporting these four years. It was a positive flyover surprise the media could avoid just as they avoided the flyover pain of the opioid crisis. Blue city plebeians, not the well to do, did not see gains to speak of but the rabble in flyover did. Add in the rent explosion and SALT tax reform, and the blue city residents were crying despite good times for the provicinals.
This also speaks to why the pundit class is surprised. They are finding out just how elective and non-essential the new economy that their masters have built is. That AirBnB, Uber, DoorDash world is a temporary, unstable subsidization for their existence in expensive blue cities. They do not realize this is an army of people scraping buy in jobs with high churn and little opportunity to enter the glorious mindwork sectors that can bring their laptops home and tap away while streaming Amazon Prime in the background. The manufacturing was shipped off, the natural resource firms legislated out of existence, and there is nothing left but service, with all the weight that word holds.
Will the jobs return quickly? Hard to say as we do not know how many bankruptcies there will be of businesses nor when firms can return to work. There is a chance everyone goes back to work in May except the worst of states and we have a mask culture that takes what Asians do but jazzes it up with flair and style. There is also a chance the nation and world is crippled for multiple years as no vaccine arrives and herd immunity is hard to hold if immunity does not last long. What we may see is a repeat of the economy of the ‘70s that adjusted to multiple oil shocks. Those shocks caused massive disruptions and forced adjustments that took nearly a decade to work out but did not destroy the world.
What is undeniable is that anyone telling you they know what will happen in 2021 might as well predict 2025. They are lying, but not lying as much as the analysts and pundits shocked to see the current job losses roll in. We need to reorient the entire economy on a balanced system of firmer footing with job sectors that provide the basics for building families and wealth, not just performing services for the rich and elect of the great metropolises.
-By Henry Delacroix
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