Oh… where have all the jobs gone?

I wonder how many jobs that have been lost during this pandemic will return, and if not, what will replace them.

Unemployment statistics are all over the place right now.

This front page from a few weeks ago is the most dramatic representation of US unemployment that I’ve ever seen.

Source: The New York Times

That red line down the right-hand side is an incredible illustration of how many people have lost their jobs in the US.

European unemployment is much lower because governments here have been focusing on paying businesses not to let people go – that’s what the furlough scheme does.

That seemed sensible while we thought the pandemic would be “over by Easter” so to speak.

But now the fear is that many of the jobs people are furloughed on here in the UK might not exist by the time society comes out of lockdown fully.

In the US by contrast, the government focused on giving people who’d lost their job some money.

So, their unemployment stats raced up much faster than ours.

Jerome Powell of the Federal Reserve spoke on Thursday, and spooked US investors by saying he believed that US unemployment would still be as high as 9.3% by the end of this year, down from 13.3% currently. These numbers should be taken with large pinches of salt and pepper by the way – they indicate the midpoint of a range of possibilities, nothing more.

The number are also very malleable – they include some things and not others and are subject to pretty wide distortions depending on how you define temporary unemployment and stuff like that.

But using the standard definition for now, Powell outlined the Fed’s expectation that unemployment would still be as high as 5.5% by the end of 2022 – a year and a half away.

He also outlined longer, slower recoveries in GDP. Markets tanked the next day – worst day since to corona crash in March, while Donald Trump and co ranted on about how Powell needed media training on how to come across less negative. I’ll leave you to imagine what I think about all that…

In the UK, as I mention, the furlough scheme has led to a different scenario.

We have “flattened” the curve of unemployment.

But there are cliffs ahead.

It’s like the adjustable rate mortgages which blew up the US mortgage market in 2007.

When the mandated interest rate increase occurred on home loans across the country, delinquencies soared as people could no longer afford the high charges.

The furlough scheme has created a similar dynamic. All seems fine for now, but as more time passes, more jobs that used to exist are going to disappear.

Companies aren’t letting them go – why bother when they are getting paid by someone else.

But the government has created a ramp up in obligations for businesses.

You can now no longer furlough any more people, but the system will remain unchanged for the rest of June. In July, workers will be able to work again (the irony!) and companies will have to pay them for the hours they do, and the government will make up the rest up to 80%.

We’ve already seen huge job loss announcements.

BP is laying off 10,000 people two months after announcing definitely certainly no job losses for at least three months.

BA could be cutting 12,000 more.

Centrica (owner of British Gas), Johnson Matthey, and Heathrow have all announced big cuts, among many others.

But in August, the pressure will build on businesses as they will have to start paying National Insurance and pension contributions again.

From September, they will have to also pay 10% of employees’ wages regardless of whether they’re working again or not, and the government will only pay 70%, with a lower cap.

In October, it goes to 20% for employers and a 60% limit from the government.

So you see, it’s like the adjustable rates going up on mortgage loans in 2007.

As each month passes now, we will glimpse further behind the curtain that the furlough system has draped over the corporate sector.

That’s not to criticise the scheme or the changes by the way – it has helped dampen the shock and the unwind had to happen at some point. But the point is that the true picture of employment in this country will now start to emerge.

After today’s news that UK GDP fell a record 20.4% in a single month in April, compared to the previous month (which was already pretty bad!), it’s hard to feel optimistic.

Fuelling the restart

One big discussion point of late has been the way in which accelerating the push towards green energy and new energy technologies could be a boost to the jobs market, as well as to our planet.

In the US, 110,000 new jobs were added to green energy roles (roughly denoting all things energy that aren’t fossil fuel related) in 2018. Clean energy already leads the way in employment terms, which most people probably don’t realise.

That took the total number of US green jobs to 3.3 million – here’s the split with our fifth fuel, energy efficiency, leading the way:

  • Energy Efficiency – 2,324,865 jobs
  • Renewable Energy – 508,484 jobs
  • Solar Energy – 334,992 jobs
  • Wind Energy – 111,166 jobs
  • Clean Vehicles – 253,599 jobs
  • Clean Storage – 74,569 jobs
  • Grid Modernization – 64,377 jobs
  • Solar alone employs more than twice the number of coal workers
  • Wind and solar already account for nearly 2 out of every 5 construction jobs in the electric generation sector
  • Not included in the clean vehicles sector are 486,000 employees in the motor vehicle industry who work with parts making vehicles more fuel efficient

The statistics are from E2’s Clean Jobs America 2019 report.

Many people rightly fear the loss of jobs from coal plant closures and oil rig redundancies. But the truth is that the world is demanding more and more energy each year, and if people can be helped to make the transition along with the energy system, the energy transition can be a driver of a return to employment. It already has been.

This is predominantly in the short to medium term by the way. It’s possible that beyond 2030 or 2040 future renewable power stations won’t be as labour intensive, but it’s too far away to tell with any certainty.

For example, solar plants’ only employees of the future may be sheep, as one recent article pointed out. Sheep are excellent grazers, avoiding all hardware and man-made installations, but clear the grass efficiently from underneath solar panels – which is pretty much all the maintenance these plants need.

 Source: British Solar Renewables 

As far back as March 24, the day after the markets bottomed (not that we knew it then), James Allen was arguing for exactly this.

Fatih Birol, IEA chief, said this: ““Their stimulus plans should seize the clear opportunities for creating jobs and improving vital infrastructure while accelerating the all-important transitions to cleaner energy.”

He advocated five broad themes or strategies, such as a cash for clunkers scheme that encourages vehicle turnover and incentivises electric vehicles (EVs), putting green jobs at the heart of the recovery strategy, and developing/scaling up new technologies.

With the big names in energy from Birol to Allen collectively calling for and predicting a surge in the progress of the energy transition, for those looking to pastures new, perhaps this could be a place to start.

And before I go…

I’ll leave you with this, because I just love this Trump contrarian indicator:

Source: Donald Trump, on Twitter 

The next day, the Nasdaq suffered its largest one-day decline since the height of the corona-crash in March.

He epitomises the magazine cover syndrome – where only when things get near to extremes are they given public recognition.

It’s “The Death of Equities” from 1973 all over again.

Will it be terminal?

Markets today are back up, which I admit I find astonishing, but Thursday showed the extreme fragility of markets and of this rally, if nothing else.

Caution remains the watchword, and perhaps today will mark the last great selling opportunity of the great 2009-2020 bull market in stocks. That day will come eventually, but we won’t know it until after the event.

James Allen crowned an incredible month by locking in a final 800%+ gain on one of our favourite energy transition stocks, one that his readers have benefited from enormously. If you get a chance to see his work in the future, I suggest you pay attention, in case he does it for a third time (last week he sold and locked in a 550% gain on a different stock).

The next investing cycle will be a great one for those ahead of the game on energy investing.

Have a great weekend,

Kit Winder
Editor, UK Uncensored

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