Jobs, Wages, COVID Demographic Shocks

David R. Kotok
Thu Oct 21, 2021

We have written recently about the jobs situation in the United States. See “Jobs, Wages, the Outlook?” https://www.cumber.com/market-commentary/jobs-wages-outlook. We expect the employment picture to worsen, which means continuing upward pressure on wages and continuing shortages of labor. Firms and organizations will try to outbid each other. Wages will continue to rise because there are simply not enough people to fill the job vacancies.

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Market Commentary - Jobs, Wages, COVID Demographic Shocks by David R. Kotok

 
This will eventually change because organizations will start to reorient their businesses in the direction of more productivity-gaining capital investment. They don’t have a choice, as there is likely to be a shortage of labor for years.  Long COVID disabilities coupled with COVID-induced demographics guarantee the changes will happen.

The reason is a demographic shock of a once-in-a-hundred-years magnitude. The COVID shock rivals that of World War 2. It may be larger. Consider these elements:
 
1. Falling life expectancy
2. Computation of Years of life lost (YLL)
3. Long COVID disability impacting the labor force (temporary or partial or permanent disability)
4. Excess deaths above projections from the pre-COVID period (2019 and prior years’ established annualized trends, which have now all been broken).

COVID is not over, so the demographic shock is still growing. Folks engage in pushbacks over continued COVID restrictions and cautions because they want this pandemic to be over. We would like that as well, but our work is not about what we wish for. A reader reminded us that the Black Plague in Europe from 1347 to 1351 was marked by repeated declarations from the political leadership that the plague was over. History also reports that the worst year was the final year. Folks, they had variants and disinformation politicians then, too.

Instead, our work is about the facts we confront and the data we see and what all of it means for the economics of the world and how it translates to the financial markets of the world. The data says this pandemic is not over. The upsurge of a new variant the UK says this not over. For more on the Delta Plus strain AY.4, see “Why Are U.K. Covid Cases So High Compared to the Rest of Europe?” https://www.bloomberg.com/news/articles/2021-10-18/u-k-falls-behind-europe-on-covid-19-as-mutation-draws-focus-kuwlrzjo.

Many in the US tend to forget that the pandemic is global. The least-vaccinated country in the world has 100 million people. Fewer than a quarter million of them have been vaccinated. That country is the Congo (see “Tracking Coronavirus Vaccinations Around the World,” https://www.nytimes.com/interactive/2021/world/covid-vaccinations-tracker.html.) Please remember that mutations flourish in unvaccinated and sickened people. They flourish in sick vaccinated people, too, but nowhere near as much.

Now here are the links to a curated list of serious work on the demographic shocks noted above.

“Tracking Covid-19 excess deaths across countries,”
https://www.economist.com/graphic-detail/coronavirus-excess-deaths-tracker
The Economist focuses on a wider measure of the pandemic’s impact, excess deaths by country. Weekly estimated excess deaths are also broken down by age group, with the figures reflecting data from 23 countries.

“State and National Provisional Counts,”
https://www.cdc.gov/nchs/nvss/vsrr/provisional-tables.htm
Data tracks births vs. deaths in the US and its 50 states. There are places and periods in which deaths markedly exceed births. For example, in January of 2021, in Alabama, 4,533 infants were born, while 7,943 Alabamans died. Deaths exceeded births by 3,410. Data can be viewed for all of 2020 and for 2021 through June.

“The hidden cost of Covid-19: years of life lost among the young,”
https://www.statnews.com/2021/10/14/years-of-life-lost-among-the-young-hidden-cost-covid-19/
According to the study reported in this article, “Because of the pandemic, Americans will celebrate at least 9 million fewer birthdays in the years to come, and more than half of them were lost to people under age 65.”

“Measuring the COVID-19 Mortality Burden in the United States: A Microsimulation Study,”
https://www.acpjournals.org/doi/full/10.7326/M21-2239
This study assesses years of life lost (YLL) by age, sex, race/ethnicity, and comorbidity. The greatest number of years lost fell among people of working age and among Black and Hispanic communities.

“Beyond deaths per capita: comparative COVID-19 mortality indicators,” BMJ Open,
https://bmjopen.bmj.com/content/11/3/e042934
This study tracks, among other indicators, loss of life expectancy in years, by country.

“Years of life lost to COVID-19 in 81 countries,”
https://www.nature.com/articles/s41598-021-83040-3
The study reported in this article found that, worldwide, YLL exceeded 20 million as of January 6, 2021. Charts show relative impact among countries.

Dear readers, we expect YLL (years of life lost) to be a cumulative double by the end of this year to about 40 million. And that is only US. Worldwide this estimate is huge. Life expectancy will again decline and total US population may also decline. These are massive changes for American markets and economic recovery.

David R. Kotok
Chairman and Chief Investment Officer
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