The Wall Street Journal - USA (2020-12-03)

THE WALL STREET JOURNAL. Thursday, December 3, 2020 |B11

A V-Shaped Recovery

Doesn’t Mean Jobs

Global manufacturing’s recovery
continues to gain traction, with
J.P. Morgan’s global manufacturing
purchasing managers index hitting
53.7 last month, the highest in al-
most three years.
But the employment portion of
that index has only just returned
to growth, and incredibly narrowly
so at a reading of 50.1. Readings
above 50 indicate expansion
month over month. That weakness
tells us something of concern
about the sort of recession the
world plunged into, and the shape
of the recovery so far.
The current global downturn is
very different to the 2008-09 finan-
cial crisis, as well as most others
historically. In short, in a normal re-
cession, manufacturing underper-
forms services, which are more re-
silient to the collapse in demand.
That hasn’t been true in this
case. Social-distancing restrictions
are far more of a limiting factor to
someone selling, say, concert tick-
ets than they are to someone sell-
ing exercise bikes. Services crashed
harder than manufacturing but re-
covered no more quickly—slightly
slower, if anything.
Moreover a lot of manufactur-
ing, particularly in the Western
world, isn’t as labor intensive as it
once was. In many cases, produc-
tion can grow considerably with-
out a surge in jobs. The same isn’t
true of food services, or even a lot
of white-collar work such as busi-
ness services.
So the portion of the economy
that is recovering quickly isn’t

likely to generate a lot of new em-

ployment opportunities—certainly

not as many as the economy will

need to recover.

A services-dominated recession

is something of an unknown entity.

Research by economists Martha L.

Olney and Aaron Pacitti suggests

the growth of the services sector

in the U.S. at the expense of manu-

facturing has made labor-market

recoveries slower. That is in part

because manufacturers can con-

tinue production in anticipation of

a demand recovery. Many services

providers can’t.

The U.S. labor market has re-

covered from the double-digit un-

employment rates seen this year,

with unemployment now back to

6.9%. But that isn’t the only issue:

The proportion of people actually

in the U.S. labor force—employed

or looking for work—fell by 3 per-

centage points as the crisis hit.

That has recovered about halfway,

but even the recovery leaves par-

ticipation in 2020 overall at its

lowest levels since the late 1970s.

And unemployment rates in many

other advanced economies are

suppressed by continuing furlough

schemes.

There is still a huge amount

that we don’t know about the re-

covery from this downturn, pre-

cisely because it is so unusual. But

at this point it is clear that the

sector really leading the bounce

back won’t provide many jobs it-

self, which may prove a drag on la-

bor markets around the world.

—Mike Bird

Consumers are eating upDoor-

Dash’s DashPass while seemingly

nibbling at offers from rivals

Grubhuband Uber Eats by com-

parison. That could prove to be

the secret sauce for DoorDash

once a pandemic-driven wave of

business shrinks.

Other food-delivery subscrip-

tions cost about the same and of-

fer similar benefits. They are a

good value for frequent users: A

$9.99 subscription pays for itself if

ordering food delivery just a few

times every month. So, in a year in

which demand for food delivery

soared, why aren’t all subscription

programs prospering equally?

From August 2018 to August

2019, DoorDash said its program

added over one million subscribers

in its first year available. That

number ballooned to over five mil-

lion subscribers as of Sept. 30,

2020, according to DoorDash’s ini-

tial public offering filing. About

28% of DoorDash’s more than 18

million users are now considered

monthly subscribers. By contrast,

Uber Technologiessaid in its

third-quarter report that it had

just surpassed the one million sub-

scriber mark for its Uber Pass and

Eats Pass programs even as the

company had 78 million monthly

active platform users across Rides

and Eats. Grubhub doesn’t release

figures, but it is believed to have

fewer subscribers than DoorDash.

A big part of DoorDash’s advan-

tage might simply be that it began

its subscription offering earlier.

Grubhub+, for example, was

launched February of this year,

while Uber’s Eats Pass was

launched broadly across the U.S. in

November 2019.

DoorDash’s early focus on cus-

tomer loyalty seems to have

played a role in its transformation

from a delivery upstart to the U.S.

market leader. So has cornering

the suburban markets, which have

proven to be a pandemic gold

mine with higher order values and

lower operating costs in many

cases. But customer allegiance

could become even more of a fac-

tor next year when consumers be-

gin to venture back out to restau-

rants.

While some of its allure may

persist, it is likely delivery con-

sumption will eventually moderate.

That means the next several

months could be important for de-

livery platforms to add subscrib-

ers. As evidence of this urgency,

all three delivery platforms are

now offering free subscriptions to

consumers through select partners

such as Chase, American Express

and Lyft, good for various time pe-

riods.

It is a good time to drum up in-

terest. With in-person dining ex-

pected to eat into growth next

year, DoorDash seems to have

hooked eaters just in time.

—Laura Forman

Driverless cars are moving out
of science fiction and onto U.S.
roads. But this is just the start of a
long journey before the vehicles
fulfill their transformative poten-
tial.
Signs of very early-stage com-
mercialization are emerging from
the corporate science projects that
want to remove human drivers
from vehicles.Alphabet’s Waymo
seems furthest ahead with its “ro-
botaxi” project in the suburbs of
Phoenix. Customers used to have
to sign a nondisclosure agreement
to hail a ride with no backup
driver, but Waymo opened the ser-
vice up in October.
Others aren’t far behind. Mo-
tional, a $4 billion joint venture
between South Korean car giant
Hyundaiand automotive supplier

HEARD

ON

THE

STREET

FINANCIAL ANALYSIS & COMMENTARY

Driverless Cars

Are Coming, but

Won’t Take Over

Autonomous taxi projects start to remove backup

drivers, an important but very early milestone

DoorDash’s

Loyalty Program

Should Deliver

An air-conditioner production line at a Haier factory in Wuhan, China.

AGENCE FRANCE-PRESSE/GETTY IMAGES

OVERHEARD

Count daytime television as

one of the pandemic’s winners.

The audience for work-hours

TV has shifted, however.

Ratings and research firm

Nielsen reports that daytime

has become “a second prime

time” for what were once

called “office professionals and

managers.” In October, from 9

a.m. to 4 p.m. Monday to Fri-

day, these white-collar couch

potatoes on average increased

their viewing time by two

hours and 10 minutes com-

pared with a year earlier.

This is even more significant

because it is a different audi-

ence than the typical daytime

TV crowd, and one with much

higher spending power. “That

means content creators, net-

works and marketers should be

actively thinking about making

adjustments to ensure that

their efforts are seen and

heard when engagement is

high,” Nielsen says.

A vaccine is coming, but not

soon enough to rip these

home-office warriors from the

tube. “The established new

routines of consumers, the

colder winter months and in-

creased movement restrictions

will further solidify daytime TV

as a true work companion,”

Nielsen argues.

In short, while stuck at

home this winter, expect more

ads for luxury cars and fewer

for reverse mortgages and

catheters.

Total world-wide number of merchants

available on each delivery platform

Source: the companies

Note: Merchant numbers are approximates. Not all merchants on each platform are available through companies'

subscription services. DoorDash’s merchants include verticals other than restaurants like grocery.

300,000

Grubhub

390,000

DoorDash

500,000

Uber Eats

Aptiv, said last month that it will

take safety drivers out of its test

vehicles in Nevada “in the coming

months.” Cruise Automation, the

driverless-car business controlled

byGeneral Motors, has said it

would remove backup drivers from

its test cars in California by year-

end.

Doing without safety drivers is

an important milestone, but there

are plenty more.

Once companies have worked

out how to operate robotaxis

safely in one urban district in good

weather, they will need to adapt to

new areas and a wider range of

conditions.

Eventually, this kind of gradual

expansion should give driverless

cars the scale necessary to drive

down costs and compete with hu-

man-driven taxis, public transport

and, in the very long run, car own-

ership.

Such lofty end goals hint at the

huge business opportunities and

threats that have drawn tech gi-

ants, the auto industry and “mobil-

ity” providers such asUberall

into the race. For a technology

that needs the highest safety stan-

dards to secure regulatory and

public support, though, the rollout

will take years, all the while con-

suming billions of dollars in capi-

tal.

Karl Iagnemma, chief executive

of Motional, pegs the price of an

entry ticket into the driverless-car

contest at roughly $1 billion. That

buys the necessary teams, compo-

nents development and a test

fleet, among other startup costs.

Much more will be needed to roll

out customer-ready fleets on a

commercial scale.

One response to this funding

challenge has been partnerships.

HondaandSoftBankhave bought

minority stakes in GM’s Cruise Au-

tomation.FordandVolkswagen

are together fielding another chal-

lenger, Argo AI. Even Waymo has

raised venture capital from outside

Alphabet this year.

The other big tech company in-

volved isAmazon. Last year it

took a small stake inAurora Inno-

vation, the biggest independent

driverless-car startup, which is in

talks to take over Uber’s operation,

according to a TechCrunch report.

This summer Amazon paid $1.3

billion for Aurora’s cash-strapped

rivalZoox.

The e-commerce company’s

move highlights the case for driv-

erless goods transport, which has

grown louder during this year’s

pandemic. Larry Burns, a former

GM executive who advises Waymo,

expects the commercialization of

driverless technology to be driven

by freight rather than taxis, partly

because logistics is all about oper-

ating costs and stands to benefit

more directly from removing driv-

ers. Waymo, which was previously

laser-focused on robotaxis, in Oc-

tober announced a partnership

withDaimler Trucks, the largest

maker of big rigs.

Then there isTesla, which at

last year’s “autonomy day”

pledged to have one million robot-

axis on the road by the end of

2020. Elon Musk walked back that
      promise in April and said it might
      happen next year. The plan is
      vague, and it is hard to see luxury
      sedans as the best foundation for
      a mass ride-hailing operation.
      For investors, the question isn’t
      just how far driverless cars are
      along the road to commercial via-
      bility, but how stoked markets are.

After much excitement in 2016 and

2017 about their potential to shake

up transportation, a fatal crash in-

volving an Uber testing vehicle in

2018 acted as a sobering reminder

that the technology couldn’t be

hurried.

The removal of safety drivers,

assuming it doesn’t trigger more

crashes, could start to revive

hopes.

Although most driverless-car

ventures are, for good reason, part

of larger groups supported by

other cash flows, it doesn’t seem a

bad time to invest in companies

with a meaningful stake in their

success, such as Aptiv. The total

addressable markets are too vast

and the disruption story too se-

ductive to ignore.

As the hype rebuilds, just re-

member: Getting driverless taxis

to work in a sunny suburb in Ari-

zona doesn’t mean they are on the

cusp of taking over the world.

—Stephen Wilmot

Latest private-market valuation

Sources: the companies; Financial Times (Waymo, Aurora)

Waymo(March 2 020 )

Cruise Automation(May 2 019 )

Argo AI(July 2 020 )

Uber ATG(April 2 019 )

Motional(Sept. 2 019 )

Aurora Innovation(Feb. 2 019 )

Zoox(Aug. 2 020 )

$30 billion

19

7. 5

7. 3

4. 0

2. 5

1. 3

Whoopi Goldberg of ‘The View’

LOU ROCCO/WALT DISNEY TELEVISION

Alphabet’s Waymo seems furthest ahead with its ‘robotaxi’ project in the suburbs of Phoenix.

CAITLIN O’HARA/REUTERS