Research by Nithin Thakur

In the wake of new relaxed mask-wearing guidance from the Centers for Disease Control and Prevention (CDC) for vaccinated adults, there is rising optimism in the U.S. that good economic times are ahead. Vaccination rates in the United States are soaring, new cases of COVID-19 are plummeting, and reports of labor shortages and rising wages are becoming more widespread by the day. However, the U.S. economy is not an island unto itself. It is deeply linked to other markets — particularly in Europe and Asia — through trade, consumer spending and investment. And outside the U.S., the global labor market picture is considerably less rosy. In this post, we’ll quantify how far away the global labor market is from full recovery in the wake of COVID-19 by using a machine learning model and the latest data from Glassdoor and the Organization for Economic Cooperation and Development (OECD) Trends in COVID-19 Cases As we’ve noted before, the coronavirus has been in the driver’s seat when it comes to when and how strongly the labor market will recover globally. In the figure below, we show the recent trend in newly reported COVID-19 cases in seven countries whose economies are closely connected: The U.S., the U.K., France, Ireland, Italy, Netherlands, and Spain. In all seven countries, COVID-19 cases surged in the final quarter of 2020. Since then, the pandemic has taken different paths in different nations. Cases fell dramatically in the U.S., UK, Ireland, and Spain during the first quarter of 2021; by contrast, during that time cases surged in France, Netherlands and Italy during a “third wave” of the virus. Since then, cases have fallen rapidly in Italy, but remain elevated in both France and the Netherlands as authorities struggle there to bring COVID-19 under control. Using Machine Learning to Assess the Labor Market The reporting system for new COVID-19 cases is very high-frequency, with new data reported daily. Unfortunately, most global economic data from the OECD lag far behind. In the above chart, the blue-shaded area shows the quarter for which the most recent labor market data are available from the OECD: The fourth quarter of 2020. When it comes to comparing global labor markets, that’s unfortunately the most recent official data available (as of this writing). How are trends in COVID-19 cases impacting different global labor markets? To examine that, we constructed an index for the overall labor market health for each of the seven countries listed above using a machine learning model known as “principal component analysis” or PCA. Using a collection of labor market indicators from both the OECD and Glassdoor, our PCA model allows us to boil down the overall job market health of each country into a single index number. An index above zero means that country’s labor market is currently healthier than its own historical average since 2015; an index number below zero means its labor market is weaker than its historical average over that same period. Using this PCA-based index, it is possible to make an objective comparison of the health of each country’s labor market compared only to its own historical trend, and not the trend of other countries with unique and different underlying economic conditions and histories. Overall Country Comparison Overall, the latest OECD and Glassdoor data show that, as of the close of 2020, none of the seven countries examined has a labor market that’s returned to pre-COVID-19 levels of strength. In particular, the figure below shows each country’s PCA index as of the fourth quarter of 2020, the most recent period for which OECD labor market data are available. Each country has an index well below zero and, as of the end of 2020, labor markets in the U.S., UK, France, Ireland, Italy, Spain and the Netherlands all remained significantly depressed. Among these countries, the U.S. labor market as of the end of 2020 remained the most depressed relative to its own pre-COVID-19 history, with an index number of -5.8. The U.S. was followed by Ireland and Spain, with PCA indices of -4.1 and -3.7, respectively. By contrast, the job market in France was closest to reaching full recovery relative to its historical performance, with an index of -1.4. France is followed by the Netherlands (-2.4), the UK (-2.7) and Italy (-2.7). Each Country Over Time While the above figure shows a cross-country comparison of labor market health as of the end of 2020, our PCA index also allows us to track the labor market health of countries over many years. In the figures below, we show, for each of the seven countries examined, the PCA labor market index plotted each quarter from January 2015 to the present. Notably, the trend in labor market health during the fourth quarter of 2020 was rising in only two countries: The U.S. and Spain. In the other five countries, the labor market health trend was deteriorating — almost certainly due to surging COVID-19 cases during the so-called “second wave” of the virus in late 2020. Source: Glassdoor Economic Research (glassdoor.com/research/) What Factors Are Holding Recovery Back? Looking at the separate labor market metrics powering our PCA index, we’re able to get some insight into what’s standing in the way of a global labor market recovery as the global COVID-19 pandemic appears to wane. In the table below, we show how far the six measures used in our index must go to reach pre-pandemic levels of late-2019, the last complete quarter before the COVID-19 pandemic began in early-2020. We see that U.S. labor force participation, unemployment, and the nation’s employment rate still lag well below pre-COVID-19 levels. However, all three metrics from Glassdoor’s online platform for the U.S. are today slightly above pre-pandemic levels, with employee overall Company Ratings, Compensation & Benefits ratings, and average annual base pay all above pre-pandemic levels. Across the other six countries surveyed we generally see a similar pattern, with labor force participation and employment rates all well below pre-pandemic levels. However, for unemployment rates, the picture is more nuanced across countries, with unemployment rates remaining significantly worse in the UK, Spain, Ireland and the Netherlands, but slightly below pre-pandemic levels in both France and Italy. Difference in Labor Market Measures by Country Compared to Pre-COVID-19 (Most recent compared to Q4 2019) MeasureUnited StatesUnited KingdomFranceIrelandSpainItalyNetherlandsLabor Force Participation (Activity Rate)-1.7-0.5-0.6-1.3-0.6-1.1-0.3Unemployment Rate3.21.3-0.21.22.3-0.50.7Employment Rate-3.6-1.4-0.5-2-1.9-0.7-0.7Glassdoor Average Overall Company Rating0.30.20.10.20.20.20.2Glassdoor Average Compensation & Benefits Rating0.10.10.10.10.10.20.1Glassdoor Average Annual Base Pay$5,918$699$1,774$734($659)($1,636)$11,042Source: Glassdoor Economic Research; OECD. Conclusion Globally as well as domestically, the data make it clear that the pace of recovery from COVID-19 is still largely dictating the global labor market recovery. While U.S. vaccination rates and broad economic optimism are on the rise, the prospects for post-pandemic recovery throughout today’s closely interlinked global economy is more complex. Based on our analysis of the latest OECD data, the world economy still faces a long road ahead toward a full labor market recovery.

Research by Nithin Thakur

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Long Haul: How Far Away is COVID-19 Recovery for the Global...

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Long Haul: How Far Away is COVID-19 Recovery for the Global...