Originally posted on December 27, 2017. Sign up for a free trial at the bottom of this page to read our current research.
Summary
- Metrics That Affect Productivity
- Jobs Wanted, Hard To Find Skilled Labor
- Are We All Playing Games and Buying Stuff on Amazon During Our Work Day?
- Well-being’s Impact on Productivity
- Zombies Still on the Rise, Potentially Keeping a Lid on Productivity
Metrics That Affect Productivity
The chart below shows one-year trading ranges (max-min) for U.S. 10-year note yields in blue and the five-year average for year-over-year unit labor costs in orange. U.S. 10-year note yields have traded within a paltry 58.7 bps range between 2.04 and 2.63 percent, rivaling the tightest range since 1980 occurring in June 2014.
Growth in unit labor costs (or lack thereof) help explain the lack of fear by investors over inflation. Productivity in the U.S. is attempting to make a rebound, but recent history has been full of false starts.
Jobs Wanted, Hard To Find Skilled Labor
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The Wall Street Journal – (July 13, 2017) Videogames Might Be Keeping Young Men Out of the Workforce
America’s young men are increasingly giving up on work in order to slay virtual aliens and fight videogame wars, new research suggests. Academics from Princeton University, the University of Chicago and the University of Rochester say there’s ample evidence that since 2000, men who would otherwise be working are instead being drawn into immersive virtual worlds, giving up paychecks in the process. What’s more, these men are reporting higher levels of happiness compared with those who work, and they’re drawing on the support of mom and dad to stay there. The paper warns these men’s absence from the labor force is likely to negatively affect their employment and earnings prospects for the rest of their lives. The paper’s authors note that 15% of younger men who weren’t students didn’t work in the prior year as of 2016, a notable increase from the 8% who didn’t work in 2000. The rise of gaming “accounts for 23 to 46 percent of the decline in market work for younger men during the 2000s,” the paper’s authors write.
Are We All Playing Games and Buying Stuff on Amazon During Our Work Day?
(from newsclips)
Summary
Comment
The next chart gets more granular by assessing popularity for what we call ‘time wasting searches’ over the prior 24 hours. All times are central. Facebook (red) is the most popular choice across the nation early morning from 5 AM CT to 7 AM CT, along with searches for the news of the day (green).
Social media like Facebook, Instagram, and Snapchat become much less sought after during work hours (gray shaded area). Many companies block the use of social media and other entertainment, but loopholes appear likely for online gaming. Search popularity for ‘games’ (orange) dominates from 8 AM to 4 PM.
Not surprisingly, Amazon remains in steady demand from 7 AM through late night at 1 AM.
Facebook and Twitter have rapidly grown as popular destinations for news and connecting to the outside world. But, labor productivity has likely seen little to no benefit with rising the distractions of social media, online shopping, and online gaming. The dopamine boost provided by these distractions and potential time-wasters make them difficult to put away. The bigger question is are workers afforded more and more time due technological innovation or are workers taking up more and more ‘work time’ with time-wasting activities?
Well-being’s Impact on Productivity
(from newsclips)
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Bloomberg Business – (July 13, 2017) Yellen Says Opioid Use Is Tied to Declining Labor Participation
Federal Reserve Chair Janet Yellen, making her most expansive remarks on an opioid epidemic that’s ravaging American communities, indicated the problem is so pervasive it is holding back the nation’s labor market. “I do think it is related to declining labor force participation among prime-age workers,” Yellen said of the opioid epidemic while answering questions during testimony before the Senate Banking Committee on Thursday. “I don’t know if it’s causal or if it’s a symptom of long-running economic maladies that have affected these communities and particularly affected workers who have seen their job opportunities decline.”
- The Wall Street Journal – (September 7, 2017) Opioid Epidemic May Be Keeping Prime-Age Americans Out of the Workforce
New research suggests a significant portion of the post-1990s decline in labor-force participation among Americans in their prime working years could be linked to the opioid epidemic. Conducted by Princeton University economist Alan Krueger, the study found that a national increase in opioid painkiller prescriptions between 1999 and 2015 may have accounted for about 20% of the decline in workforce participation among men ages 25 to 54, and roughly 25% of the drop in prime-age female workforce participation. “The opioid epidemic and labor-force participation are now intertwined,” Mr. Krueger said. “If we are to bring a large number of people back into the labor force who have left the labor force, I think it’s important that we take serious steps to address the opioid crisis.”
- The New York Times – How Social Isolation Is Killing Us
A great paradox of our hyper-connected digital age is that we seem to be drifting apart. Increasingly, however, research confirms our deepest intuition: Human connection lies at the heart of human well-being. It’s up to all of us — doctors, patients, neighborhoods and communities — to maintain bonds where they’re fading, and create ones where they haven’t existed.
We turn to Google search trends within each state’s boundaries in an effort to explain differences in productivity. Search trends offer a glimpse into the biases and sentiment of each state’s population.
For example, we gather popularity of searches for social media like ‘Facebook,’ ‘Instagram,’ and ‘Snapchat’ versus a desire for physical social interaction like ‘rotary,’ ‘clubs,’ and ‘intramural sports.’ These search trends are capable of explaining nearly 54% of the variation in relative productivity by state.
Is it possible languishing wages and technological disruptions changing the workplace are having a damaging impact on mental and physical well-being? We appreciated Chamath Palihapitiya’s comments regarding social media altering, potentially negatively, the way we make social interactions.
The chart below shows search trends coinciding with weaker state growth when at higher popularity. Not surprisingly, opioids make this list along with mental illness and addiction. However, the increased popularity of online games and Facebook are met with lower growth.
Conversely, the higher popularity of searches for rotary and clubs are found in stronger growth states. Low popularity for social clubs is met with weaker growth.
Zombies Still on the Rise, Potentially Keeping a Lid on Productivity
(from newsclips)
What is A Zombie?
We looked into the rise of ‘zombies’ across the S&P 1500 by calculating the percentage of companies with EBIT-to-interest expense ratios (3-year average) below ‘1.’ We began with the current list of S&P 1500 companies, therefore history will be skewed due to survivorship bias. Similar to the BIS’ calculations above, companies must be at least ten years old.
The chart below reflects the percentage of ‘zombies’ or ‘walkers’ found within the S&P 1500. So what is to blame? Low costs of funding, inefficient allocations via ETFs, and/or low U.S. Treasury yields relative to dividend yields?
More on Zombies Corporations here, here, and here.
Last week we showed low-interest rates have given way to a plethora of zombie companies unable to produce earnings over and beyond dollars paid on interest expenses. The chart below shows the percentage of companies skating by potentially due to the low costs of funding. Darker shading indicates higher percentages of zombie companies
The next chart shows the relative growth (GDP) for each state to the average. Green shading indicates above-average growth, while red indicates those states falling behind. Many of the states with greater prevalence of so-called zombies are also less productive.
Financial media is right to point at low-interest rates helping prop up companies who would otherwise have difficulty handling the costs of funding. The chart below shows U.S. 10-year note yields versus the overall percentage of zombie companies since 2000. Lower interest rates have coincided with a much greater number of companies with interest expenses dwarfing earnings.
