In Ready Player One, Steven Spielberg’s latest blockbuster, much of the population of a desolate future America have abandoned the world of work for the virtual reality of gaming in a software program called the Oasis. A report from the International Monetary Fund on Monday suggests it’s perhaps not such a fanciful future after all.
The rather more sober, official title of the IMF report is Labor Force Participation in Advanced Economies: Drivers and Prospects. What it reveals is a sharp and still barely understood divergence between Europe and the US, especially since the 2008 financial crisis.
The number of women in the workforce in Europe has been rising strongly, said the IMF. But in a “striking difference” the trend has gone into reverse in the US. Meanwhile, jobs for “prime-age men” have stagnated or dropped back a bit in Europe, but in the US the decline has been far more serious.
“The reason that US prime-age men and youth became so much more disconnected from the labor market than their European counterparts remains puzzling,” said the IMF.
But it does offer some hypotheses although not endorsing any; opioid use, rising disability and higher incarceration rates in the US all get a mention. But it also points to a paper from the National Bureau of Economic Research which concluded that young males are dropping out of the workforce to play video games instead.
Social gaming – where players connect with others across the internet – took off with World of Warcraft in 2004, and since then the researchers say they have found a direct correlation with reduced labour force participation. How do these young men support themselves if they’re not working? They don’t – many more just live with their parents.
A generation sinking into gaming is not the only troubling feature of this IMF report. It charts the overall decline in US labour participation, particularly pronounced in the mid-west states, but stretching to the coasts as well, with New York the only major metropolitan area to buck the trend.
None of this can be read without reference to Donald Trump’s election victory and the escalating tariff and trade wars. The IMF acknowledges that workers in manufacturing earn around 30% more than the service sector jobs many are dumped into when production goes offshore. But Trump’s prescription for making America great again – by reshoring manufacturing jobs from Asia – is fraught with danger. Very few advanced economies have increased manufacturing output as a share of total GDP since 1960 (Ireland by the most), yet every single one has still seen jobs in manufacturing decline. And the only major economy to lose more manufacturing jobs than either Britain or the US since 1960? Step forward Hong Kong.
House prices: the out-of-touch commentators
The surprise spike in the Halifax house price index – up 1.5% in March, the biggest rise for six months – wrong-footed many economists who are predicting a flat 2018. But it brought joy to estate agents everywhere. “These numbers represent an impressive sprint finish for the first quarter,” said the James Pendleton agency. “This is an enormous rebound … Any Brexit fears seem to have abated for the time being,” said House Simple, another agency. Meanwhile at Garrington Property Finders they opined that “After February’s freeze, the March thaw brought some relief to the property market.”
Joy? Relief? For whom? That 1.5% gain in March alone meant that the average house price in the UK reached an all-time high of £227,871, or around nine times average incomes.
The only real joy that has emerged from the UK property market in recent months is how prices have stumbled in London, dropping from completely crazed to somewhere just a tiny fraction below totally idiotic. The hope must be that the London falls will radiate out of the capital across the country. If we are to see yet another UK house market surge, at the very time that the economy is mired in Brexit uncertainty, and when personal debt levels are calamitously high, then there really is no hope for young people. Maybe there’s a rationality to all that time spent playing World of Warcraft instead.
But the reality is that this spike in house prices is unlikely to persist for long. A formal rise in interest rates is coming, with the first increase likely in May. Meanwhile an informal increase is already happening, after the Bank of England withdrew the £106bn Term Funding Scheme punchbowl from the party last month. Data supplier Moneyfacts has revealed today that the interest rate on the average two-year fixed rate mortgage has reached a 19-month high. These are not the conditions in which we will see another surge in property prices.