Do Robots Count?

Many magazine covers and article headlines might lead folks to believe robots are taking over the labor market. Heck, even Atlas has written notes regarding expectations of greater automation in our economy. While firms have been able to produce cool robot videos like this one, there seems to be something missing in the data. This note will explore a couple of the glaring omissions.

Money spent by firms on wares like robots is likely captured in a subset of the monthly Durable Goods Orders (DGO) from the Census Bureau. However, the data are not showing much strength. Nondefense capital goods orders excluding aircraft spent nearly two years in the red on a year-over-year basis. Fortunately, this has changed recently, but the trend remains woefully shy of levels reached in previous expansions. Unless robots and automation aren’t being counted, firms might not be spending as much on them as headlines suggest.

At the very least, productivity figures should be enhanced even if robots are not counted in the monthly DGO tally. Unfortunately, this is not happening. Since the end of the Great Recession, the year-over-year tally for productivity has fallen below zero three times, and one of those instances (2nd quarter 2013) was worse than the drop during the economic contraction. For additional context, this year-over-year figure did not dip below zero once in the expansion from the end of 2001 through December 2007. If machines were replacing workers in a material way, output-per-labor-hour (a measure of productivity) would likely be growing at a faster than average pace since fewer labor hours are needed to generate a similar amount of goods and services in an automated/robotic world. Technology is obviously having an impact on the labor market, but perhaps some of the worries expressed in headlines are overdone.

Workers in certain industries might have justified concerns regarding automation. Here is a previous Atlas note regarding truckers for instance. But it might be premature to worry about wholesale worker replacement. That being said, participants in America’s labor economy must continue adapting to the growing use of productivity enhancing technologies, including robots. Our nation’s position as the vanguard of innovation is unlikely to change, so workers must.