Every country is recovering from the pandemic in its own unique way, but the US is remaking its economy much differently than other developed nations. One reason is due to the massive suburbanization trend that has taken hold in the US, with swaths of Americans choosing to relocate from urban to suburban areas as they seek more space and remote work. Nick has shown this play out each Sunday through traffic congestion data, with traffic and mass transit usage recovering much quicker in Europe than the US as a result.
Today we want to delve deeper into this concept by comparing consumer and work behavior in the US versus the UK. We felt this was a fair comparison because both countries are in recovery mode and are similar in terms of language, political, economic and capital market structures. Three points here:
#1: The unemployment rates in the US and UK continue to improve, but workers are quitting at far higher rates in America. For example, the unemployment rate in the UK was 4.6 pct as of August, marginally better than the US at 5.2 pct.
Both countries also posted record high job openings last month. In the UK, the number of job vacancies climbed above 1 mn for the first time ever in the three months to August. In the US, open positions jumped to an all-time high of 10.9 mn in July (latest available data). When adjusting for the size of each country’s labor force, however, job openings as a percent of the workforce is 3.0 pct in the UK and 6.8 pct in the US.
Takeaway: while employers report difficulty finding workers in both the US and UK, job openings as a percent of the labor force in the US is more than double the same rate in the UK. Filling open positions poses a much greater challenge in America.
#2: Google searches for “remote work” are structurally higher than pre-pandemic levels in the US but not in the UK. To highlight this disparity, we have two charts below that show US Google search volumes for “remote work” in the US and UK over the last 5 years. Here’s what we see:
- In the US, searches spiked to a peak in mid-March 2020 when the US went into lockdown mode. That 5-year top was 59 pct higher than the prior high in December 2017.
In the UK, queries also picked up in mid-March 2020, but they did not peak until several months later in mid-December. This 5-year high only matched the prior top in December 2016.
- In the US, searches for “remote work” have generally remained within the index band of 50 to 75 versus 25 to 50 pre-pandemic and have climbed steadily this year. Queries are currently 5 pct higher than the pre-pandemic 5-year peak.
In the UK, searches have proven more volatile and with greater overlap with pre-pandemic levels. Current queries are down 7 pct from the pre-pandemic peak.
Takeaway: the UK has not seen the breakout interest in remote work that the US has experienced since the pandemic began. If there’s ever an environment in which people will most want to work from home, this is it. Yet attention on working from home in the UK did not even surpass the pre-pandemic 5-year high. Interest in the UK is also a lot choppier, but it continues to rise for Americans despite vaccine rollouts.
#3: Home prices are accelerating at a faster rate in the US versus UK. Consider these stats:
- In the US, home prices increased 18.6 pct annually in June according to the S&P CoreLogic Case-Shiller National Home Price Index. That was the largest annual gain on record and up from 16.8 pct in May.
- In the UK, average house prices rose 13.2 pct annually in June according to the Office for National Statistics. That marked the highest annual growth rate since November 2004 and was up from 9.8 pct in the prior month.
- It’s not that the UK has an easier comp. US home prices rose 4.4 pct annually in June 2020 versus 2.0 pct in the UK.
Clearly elevated demand for purchasing a home is driving outsized annual gains in house prices in the US and UK, but even Google searches for “buy house” shows stronger interest in America. For example:
- US Google searches for “buy house” hit a 5-year high in the Summer of 2020 and March 2021. They were up 39 pct versus the pre-pandemic high in June 2019. Current levels are still 15 pct higher than the top before the Pandemic Crisis hit.
- UK Google searches climbed into Summer 2020 and reached a new 5-year high that July. March 2021 set a new peak, which was 25 pct above the pre-pandemic high in January 2019. But current levels are down 7 pct from that top.
Takeaway: interest in buying a home is structurally higher than pre-pandemic levels in the US, while it is falling back to 2019 levels in the UK. No doubt fast rising house prices show heightened demand in both countries, but it is a more pronounced phenomenon in the US.
Bottom line: the trends towards suburbanization and remote work is specific to the US. There are remnants of these trends in the UK, but they are not nearly as strong when looking at traditional datasets or real-time interest through Google searches. As Americans migrate and buy homes in the suburbs and negotiate more flexible work arrangements, many job openings – especially in urban areas where unemployment remains high – are that much harder to fill. At the same time, new homes require several new purchases, such as furnishings, electronics and decorations, that boosts the overall economy. By contrast, the UK is reverting to the work and consumer behavior norms of 2019.
In the end, we believe the US economic recovery in 2022 – 2023 will look a lot different than other developed nations such as the UK. This involves greater labor turnover as the US resets its workforce and economy, and businesses try to learn how to maximize productivity under these new dynamics.