The Changing Face of the US Economy

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.

US Trade Deficit: Impacts

The US has been a huge trade deficit for almost half a century.  Last year the figure was $552.3 billion and America’s deficit just with China amounted to $335.7 billion.  The question is, what impact does this have for America’s economy?  Experts have different ideas as to where this ultimately leads and what it means vis-à-vis its imports and exports.

For the most part, the commonly held view among economists is that such a trade deficit has little or no impact on unemployment figures or makes any dent on the economy in a negative day-to-day way.

Especially when looking at the money made from consumer imports like apparel, mobile technology, appliances etc.  Yet the question arises as to how it will impact the economy as travel and media are more utilized given that there was a $255.2billion surplus in that in 2017 as well.

Another argument could be made that America’s increasing trade deficit is actually more due to America fiscal policy and currency swings than trade policy.

According to Oxford Economics economists, there is little expectation that the trend will alter all that  much with the recent agreement between Xi Jinping’s recent agreement to increase its US export purchasing.  They pointed out:

“Although China has agreed to import more farm, energy and industrial goods, and restart importing soybeans ‘immediately,’ we look for export growth momentum to continue to wane,” they wrote, pointing partly to a slowing global economy.”

Plus the fact that it is getting even more expensive (increase from 64 percent of GDP in 2007 to 105.5 percent in 2018) to rescue America from its deficit.

So there is a long way to go until America is even on the road to recovery.  It seems that with its greatest deficit in a decade, the fact that oil exports are on the rise will do little to temper the  moods of the country’s economic advisers.

US Economy: Lengthening and Strengthening

America’s economy is strengthening.  And this is being matched by its length expansion as well. Indeed in May of this year, “the U.S. economic expansion has become the nation’s second-longest on record.”  A lot of the country’s power is size-related – being one of the world’s largest countries vis-à-vis population.

Since the country is so large, its task of keeping its economy on track – even growing – becomes more challenging.    But it seems to be responding to this situation extremely well.  Just looking at figures for last month we see a creation of 250,00 jobs nationwide.  Growth rates in the 2nd and 3rd quarters this year were 4.2 and 3.5 percent respectively.

Experts are even saying now that if there is still no recession by the end of June, this uptrend will exceed 120 months, outpacing the last huge expansion that occurred in 1991 for two years and breaking the record since 1857!

And then of course this has a cumulative effect worldwide.  Workers outside of America that are manufacturing products sold in America benefit since global growth in general is extremely dependent on US economic cohesion.

According to Federal Reserve chairman, Jerome H. Powell, a lot of this good news is because of the successful work of the Fed.  He said:

“I’m very happy about the state of the economy now. There’s pretty good reason to think we’re going to continue in a positive vein like that. Our policy is part of the reason the economy is in such a good place now. I want to leave on a note of optimism about our economy. We’ve been through a difficult time and we’ve faced difficult times before. We’re in a good place now. I do believe our economy can grow and grow faster.”

US Economy: “Humming Along Just Fine”

Numbers for the end of October show that there was a 3.1% increase in wages and salaries (according to the Employment Cost Index – ECI) and 227,000 jobs created (far exceeding the actual expectation). US economy clocked one of its best six month stretches in the past decade with growth up 4.2% in the second quarter and 3.5% in the third quarter.

Watch this for more:

US Consumer: “In Good Shape”

The current state of the average American consumer, is, according to CEO at The Hershey Company, Michelle Buck a good one. Americans’ confidence in the economy is positive. Brian Cornell feels similar.  As CEO of Target he sees similar activities to his peer Buck, purporting that the “consumer environment may be the strongest [he’s] seen in [his] career.”

One reason for this – Cornell believes – is because Americans are “seeing wages rise.”  According to entrepreneur and investor Kevin O’Leary, it is the “small domestic companies” we have to thank for this.  He said:

“Small domestic companies are the unsung hero of the policy that’s emerged from this administration.”

With a staggering 6.7 million job openings seen at the end of  June 2018; a situation which has been described as “an unprecedented imbalance.” Indeed, as numbers from the Department of Labor show for the end of October, 2018 the amount of people receiving extended jobless benefits – 1.636 million – is the lowest since 1973.

O’Leary further explained that:

“We are having the best year ever — ever in the last decade,” O’Leary said. “The deregulation in the state and the municipal and the federal level has given confidence to these operators to do something they haven’t done in 10 years: to actually take out loans and invest in their businesses, and create jobs, and increase sales, enhance margins, scale up.”

Still, there is some cause for concern since there are currently 7.14 million job openings, which basically means Americans are not skilled enough (or too lazy) to fill these positions.  So there needs to be some work on job training and career guidance.

The midterm elections and policy-making from now until 2020 could have a substantial impact on this.

Market Alert

Martin Feldstein – Economics Professor at Harvard University – reports on FOX Business on “how the Trump administration reached a trade deal with Canada and Mexico. Feldstein also discussed the current state of the U.S. economy.”

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