This is a summary of a column that appeared in the FT on 5 July 2020.
The full column appears here:
https://www.ft.com/content/607f24f5-71ed-452c-b68e-716145584e3d
Private data sources paint a detailed and worrying picture of the labour market after the Covid-19 shock
The latest US employment data showed that a marked recovery in the labour market continued into June, although only about a third of the jobs lost during the coronavirus shock have so far been regained.
The improvement is good news, but it should not be taken to imply that the labour market will rapidly return to normal, either in a macroeconomic sense, or in the distribution of job opportunities across the population. A full return to pre-coronavirus jobs health will be long and difficult.
New data sources derived from private sector business activities, such as credit card flows and hiring websites, as well as Google searches, provide much richer sources of information about the behaviour of the labour market than have been available in previous recessions.
For example, on the macro side, Raj Chetty of Harvard University, a leading proponent of big data to improve economic research, has released an impressive website that provides daily information on US consumer spending and much else, using private sources.
Professor Chetty's data shows that after a surge in consumer activity up to mid May, the recovery has slowed down, with consumption recording a growth rate around 0.2 per cent a day up to the latest data on 24 June. The slowdown may well continue now that California, Texas, Florida and Arizona, together representing about 30 per cent of the US economy, are suffering from a worrying upsurge in Covid-19 cases.
On the micro side, the concentration of employment losses among unskilled workers in specific locations, with many permanently failed businesses, will become increasingly difficult to correct. The serious concerns about a deep-rooted scarring of the labour market, forcibly expressed by many Federal Reserve officials, would then be entirely justified.
The top three priorities to fix the jobs market in the US and elsewhere are virus policy, virus policy and virus policy. Focusing on general demand expansion won't work.
