Automobile Industries and America

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automobile industry

We often hear about US industries that choose to go abroadperhaps looking for cheaper labor, but what about the firms which are now choosing a return to American soil?  Here we take a look at ones from the automobile industry.

The Groupe PSA (French multinational automobile manufacturer of cars including Citroen, Peugeot, Vauxhall) is planning a comeback of its Peugeot brand.  Back in 2016 the firm started working on a 10-year plan to create its presence in North America.  In 2018 it offered a car-sharing service in Washington, DC.  

Within the same industry the Chinese wish to make a presence in America too.  The problem there of course is the ongoing US-China Trade war and the US’s increasing vigilance vis-à-vis Chinese technology.  Despite this, Americans are really starting to favor electric vehicles with government policy promoting eco-friendly cars.  according to GAC Motor President, Yu Jun, the firm’s “ultimate objective is to build the company into a world class brand and a global player,” which would obviously benefit from the creation of a presence in the US.  

Yun really believes that the his brand will ultimately win over the Americans despite the politically-economic issues.  Indeed, the company’s Entranze electric concept car was unveiled in Detroit at January’s North American International Auto Show held in Detroit and received well. Entering the US market in 2015, Yu pointed outat the show that the firm has since “been making steady progress” in the US market.

Then there is Volkswagen. supporting approximately 16,400 jobs in Tennessee via the Chattanooga assembly plant and other impacts, a substantial amount of revenue is being generated from the firm.  for example, in 2017 Tennessee took around $73.8m in state and local taxes.  It was good for Volkswagen too since its economic output in Tennessee was approximately $8.56 billion in 2017.  

So for automobile industry workers, the US economy is really working!

The US’s Global Power: Today and Tomorrow

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Global power

We know that America is a superpower but in practical terms, what is its real contribution to the world economy? Given that the United States actually purchases over $500bn morethan it exports, the net contributionAmerica is making worldwide gives it a very impressive status within the international economy.  This also leads to an enhancement of Washington’s role as a world superpower.

This gives America heightened bargaining status vis-à-vis the coordination of global economic policy. And that is the most important assignment undertaken by G-20 summits – the address for the international economic forum. This year, come June – when America’s representatives head out to Japan for the meeting – America’s position will be stronger, especially vis-à-vis its capacity to reduce its trade deficits.

Furthermore, as soon as President Donald Trump pushed back the March 2nddeadline in the US-China trade dispute. There has been progressfrom both China and US in reaching a solution but as Oxford Economics Chief US Economist Gregory Daco cautioned:

“Popping the champagne today would be premature.  [The far-reaching disparity between the two nations] will prevent a significant de-escalation of trade tensions between the two giants.”

Indeed, if the end of year figures are anything to go by, the champagne bottle shouldn’t even be purchased yet. According to figures from last year, the fight to find a solution between the two nations “disrupt[ed] the global trading system and the cross-border production lines that businesses have built over recent decades.”  Plus, a recent National Association for Business Economics surveyfound that 75 percent of economists believe America’s economy will slump into a recession by 2021, the China-US trade war being cited as the main reason why.

US Economy 2019 Predictions

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Road ahead for 2019

Despite the country countering perhaps its longest ever government shutdown – resulting in a projected decrease of US GDP by $8bn in Q1 2019 – the Congressional Budget Office has predicted a growth in economy of 2.3 percent this year. 

Still, that is a hit given that 2018 saw a 3.1 percent increase.  Tax cuts and federal spending increase attributed to that growth.  even though currently there are concerns due to the US-China trade tensions and concerns of an international economic slowdown, the fact that the CBO is predicting even 2.3 percent is good news.

In its Budget and Economic Outlook: 2019-2025 Report the CBO stated:

“federal revenues rise from 16.5 percent of GDP in 2019 to 17.4 percent in 2025 and then grow more rapidly, reaching 18.3 percent of GDP near the end of the decade. The projected growth in revenues after 2025 is largely attributable to the scheduled expiration of nearly all of the individual income tax provisions of the 2017 tax act.”

Still, the US economy cannot afford to rest on its laurels.  according to a recent CCN article, America’s place on the world economic throne is likely to be challenged and:

“The United States will fall to a third place in the ranking of the largest economies in the world. China and India will overtake the U.S. by 2030, and it is unlikely that we will ever get the throne back.”

The American Dream: A Look in 2019

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President and CEO of the US Chamber of Commerce, Tom Donohue presents his 2019 State of American Business address in this video.  He focuses on policies that result in the bolstering of growth to “enable workers, families, and businesses to pursue their American dreams.”  As such, in the video, one business owner Brian Steorts, Flags of Valor, described his American dream as the ability to “remember, employ and empower” his employees…remembering how we became the greatest country in the world.

Maria Rios of Nation’s Waste, explained: “Coming to this country from El Salvador, becoming an American citizen and starting my own business and creating jobs for other americans; that was my American dream.”

Mark Wilson, Chime Solutions, Moscow, GA “My American dream was to see people reach their full potential; that’s what the American dream is really all about.”

There are different American dreams here; but business is the “common thread that combines them.”

Economics and the Gender Disparity

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US economics: gender disparity

Despite major strides having been made in closing the gender gap in many industries, it still remains and in some sectors, quite substantially too.  This was a key area of discussion at the annual American Economic Association which took place earlier this month. 

Attended by thousands of economists, each year – hundreds of whom delivered their papers – this year’s event had a definite underlying theme; the gender disparity that continues to exist in global economics.  Keynote speeches on where today’s economy is at were given by Jay Powell, current chair of the US Federal Reserve as well as past chairs, Ben Bernanke and Janet Yellen.

according to a paper presented last year by Alice Wu on Gender Stereotyping in Academy, when it comes to the principal economic jobs’ online forum, there is clear discrimination against female economists with 85 percent of full economic professors being men.  in addition, the Nobel Prize for Economics has only been awarded to a woman one time and over the last two decades, only a third of women hold positions as economic majors nationwide.

Another example of existing chauvinistic attitudes was found in a study brought up in an interview with Bell Award winner Rohini Pande.  she referred to a study  which proved how men advance in economics and gain tenure for both authoring and co-authoring papers whereas their female counterparts only get it when authoring.  the assumption made is that a female co-author has not undertaken the research; only the man.

According to the World Economic Forum’s Annual Global Gender Gap Report, “it will take 108 years to close the gender gap worldwide according to today’s criteria. When the index was first conceived in 2006, assessing countries on their progress in four areas – economic opportunity, education, health and survival, and political empowerment – it was hoped there would be a vast improvement in both the opportunities and rewards offered to women.”

This timeline is clearly unacceptable and of the 149 countries surveyed, the average gender gap remains too large – at 32 percent.

2019 and Global Economic Impact

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US economy 2019

Where is the US economy headed?  What impact will the global economic sphere have on this powerhouse region in 2019?  In this article we take a look at what some of the experts believe will happen – economically and geographically speaking – this year.

According to Ian Bremmer, President of Eurasia Group (a company “dedicated to defining the business of politics”), the greatest geopolitical danger we will face this year will be:

“the crises we ignore… setting ourselves up for trouble down the road. Big trouble. The geopolitical environment is the most dangerous it’s been in decades … and at a moment when the global economy is faring well.”

Together with Cliff Kupchan, Chairman of Eurasia Group, Bremmer believes that the problem is how global decision-makers are ignoring potential future risks with their over-focus on everyday crises that naturally emerge from a leaderless world. This results in “serious consequences for our collective midterm future.”  Examples of this include: the state of the EU, NATO, G20, G7, WTO, the Kremlin and Russia; US-China relations and more.  Given that all these currents are extremely negative, this is extremely problematic.

But which country is causing the biggest negative impact?  According to Matt O’Brien, a Washington Post contributor and business journalist, “China is more of a concern for the global economy than America.  It encountered a huge benchmark stock index descent, ranking it the world’s worst in 2018.  Some of this can be attributed to Trump’s embryonic trade war could significantly intensify but that’s only somewhat.  The real issue was activity in Beijing.  According to IMF reports, China’s credit stimulus has resulted in diminishing returns with a lot more new debt being used to pay back old debt or channeled into improbable growth-driven projects.

Still, Schroders Group Chief Economist Keith Wade anticipates a mid-year 3% US interest rate peak while some banks in other countries will continue the monetary policy squeeze.  What will likely be beneficial to emerging market assets however, is the likelihood of the slumping US dollar.

It’s also likely that Eurozone growth will become sluggish due to the US-China trade war as well as a drop in GDP growth by .3%.  it’s hard to predict the movement of emerging markets due to lower demands from the technology industry toward Asian business although that could be to the benefit of Latin America.

US Economy: Heading into 2019

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Lowering of gas prices in 2019

How are things going to look for the average Joe in the street in 2019 in America?  Well, we can’t predict what is going to happen but herewith a few positive tidbits for money-savers.

Since close to 90% of Americans own cars (second  highest number in the world) the fact that gas prices are going to decline this year is huge. This will be the first time gas has gone down for Americans since 2016.  As GasBuddy Petroleum Analysis Head Patrick DeHaan said:

“2019 sets the stage for the first decline in the yearly national average since 2015, but before motorists drive for joy, it may be prudent to remind them that 2019 will still be the second most expensive year to fill up since then.”

The job market also continues to thrive.  According to Moody Analytics’ Chief Economist Mark Zandi, unemployment figures are very low and are set to continue to drop in 2019.  Indeed, the figures for December 2018 were just 3.7% unemployment (nationally), lowest they have been in nearly five decades.  As well, there is a staggering amount of new job openings in almost all sectors.  As such, it is anticipated that salaries will increase from around 3 to 3.5 percent by 2020.  This gives employees the “upper hand” with their bosses. 

US Economy 2018-2019: The Good, The Bad and the Ugly

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Nasdaq

When reviewing America’s economic 2018 report, it is important to focus on the year in its entirety rather than look at what happened in the last month of the year. According to a recent interview held with NPR’s Scott Simon, it’s important to know this:

“The numbers for 2018 are good. The gross domestic product is growing. The U.S. economy is humming. But the numbers for December are bad. The Nasdaq, the Dow and the S&P all ended down yesterday.”

The US economy remains on its decade-long growth spurt.  It’s just that this month has seen some issues like: the partial government shutdown; continual drop in the stock market; increasing disarray in Trump’s administration; America’s trade war with China and more.  Oxford Economics Chief US Economist Gregory Daco however sees that the main attributes required for growth have not been impacted and thus we will continue to encounter expansion.  However, the stock market plunge could actually cause a domino effect with other issues.

So just because the economy took a bit of a nosedive in the third quarter should not put anyone into a panic. Growth remains on track to reach Trump’s 3 percent target for 2018 with a GDP increase at a 3.4% annualized rate (only a slight drop from the 3.5% October estimation). Still in the second quarter growth reached 4.2 percent.

Trump is blaming all of this on Jerome Powell and the hike in key short-term rate by the Federal Reserve tweeting that its officials “don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch — he can’t putt!”

The Changing Face of the US Economy

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Fading Era of Industrialization

The US economy has undergone substantial change – vis-à-vis industries and approach – over the last five decades.  For example, the industrial economy has undergone a huge abatement with the mechanization of a lot of the older industries.  Consequently a lot of the industries have moved their businesses out of the country seeking lower costs.

The numbers speak for themselves. For example, in 1979 there were 19.4 million manufacturing jobs in America.  Today, there are only 12.7 million.

So what has replaced this?  According to Peter Temin, Professor Emeritus of Economics at MIT, a knowledge-based economy that he has dubbed “FTE”: Finance, Technology and Electronics.    He believes that this is concentrated in specific areas like Chicago, Los Angeles and Seattle (Microsoft).

This is also known as the sharing economy – an economic principle continuously in flux.  Referred to as “one of the fastest growing business trends in history,” it has encountered over $23 billion in VC funding investments since 2010. It uses technology to simplify the process in which goods/services are exchanged between two or more entities.  The original idea is that there are enough entities/individuals who share values who can benefit from a skill/asset that is not being utilized to full capacity which occurs through a shared marketplace/peer-to-peer application.

The concept of the sharing economy is not a new one (rural communities lived that way for thousands of years;bartering; the kibbutz concept; communal living etc.).  But with the Internet it becomes a lot easier and more accessible to the masses.

Yes the US economy is changing.  But a lot of that change is just  making life a lot easier and a lot less labor intensive for the average person.