As we exit the commercial shackles of the pandemic, the idea of the “autonomy economy” seems to be the new norm. This concept has been coined and applied in several areas, covering everything from the progression of self-driving cars to the implementation of block chain technology. But for my purposes, and for application to the wider world, the autonomy economy represents the shift in labor and production to endeavors controlled by the individual.
Consider the post-pandemic labor market. Most businesses, especially those in the service sector, are struggling to hire and maintain full employment. I frequently overhear that “nobody wants to work anymore.” But I believe that couldn’t be further from the truth. What appears to be more accurate is that nobody wants to GO to work anymore.
According to the U.S. Bureau of Labor Statistics, the national Labor Force Employment Rate has dropped below 60 percent just twice since the mid-1980s. The first was in the midst of the Great Recession in 2008 and took about five years to correct. The second was a sharp drop as the lockdowns from the COVID-19 pandemic took hold, but the numbers rebounded relatively quickly and climbed back above the 60 percent threshold this year.
However, that rate among the youth labor force (workers age 16-24) dropped by 1.4 percent between 2019 and 2022 and has shown no signs of a rebound. That makes sense as work for the youth, most of whom are still living with their parents, is typically more optional than among those who live on their own.
The story behind those numbers indicates that there is no general labor shortage. Instead, it seems to indicate a shift in the type of work people are willing to do. The service sector as a whole has remained largely unchanged over the last 10 years, but the sub-sectors of wholesale trade, retail trade, and leisure and hospitality have all seen a decline. Those industries have all traditionally utilized younger workers as part of their labor force.
The other side of the statistics indicate that employment is trending toward other sectors. The sub-sectors with the largest increase are professional and business services and healthcare. And coincidentally, both of those areas have trended toward self-employment and/or working from home.
The U.S. Census Bureau estimates that between 2019 and 2021, the number of people primarily working from home tripled, essentially confirming the statistics above. It is no surprise that in the wake of the pandemic workers have begun seeking opportunities to work from the comforts of home.
Those statistics will likely revert to the norm over time, but it will likely take awhile and will probably never reach the pre-pandemic numbers. Many businesses in the professional sectors have adopted work-from-home strategies so as not to be left out in the cold when it comes to acquiring talent. And as a result, the service sector is left out in the cold.
For investors, it seems to reason that a tilt toward professional services such as banking, insurance, and technology should create an opportunity to take advantage of the autonomy economy when the market recovery comes. Conversely, going underweight on traditional retail, food and beverage, and travel stocks could prop up portfolios.