The announcement has rolled through Wisconsin. $3 billion in aid will land a total of 13,00 jobs somewhere around Kenosha. Or maybe less. Or maybe it won’t happen at all, like past promises. But it’s a great deal, one that will create jobs.
It’s hard to say exactly what the Taiwanese electronics manufacturer is going to do given how quickly the breathless announcement came out. What matters is that it had to be announced because it’s not actually about jobs or anything tangible. All of this is just a very expensive form of political theater, allbeit with stakes lower than last week’s show. Government is here to fix the economy and provide jobs, right? So here ya go.
Like many sequels dished up by Hollywood this is a must-see summer thriller. It’s following a well established formula that everyone loves. And like those movies, it begs the question – where did this come from?
Are you properly compensated for your work? As we discussed previously, between 1947 and 1973 worker’s salaries accounted for half of Gross Domestic Product (GDP). There was a solid if unspoken agreement that labor and capital split the spoils of the free market equally between them.
But what of output per worker? Is it possible that workers are slacking off and don’t deserve the same arrangement they had in the immediate Post WWII era? An analysis of productivity, or output per worker, shows some interesting trends that may point to more unspoken agreements that the various markets for capital and labor expect. These trends follow business cycles, and as such point to some important changes that are necessary as we move ahead into the next cycle in the next few years.
Are you better off now than you were so many years ago? It was a question first raised in the 1980 campaign, a motto used to defeat President Carter. The answer then was a rather sure “No!” and the voters responded, blaming the man in charge. But are you better off now than then? And was it fair to blame Carter or any President for the state of the economy?
A few graphs showing the state of workers in the Postwar Era (1947-today) shows how the problem persists. Sen Sanders has often said that the last 40 years have been a slow retreat for workers, and he has a point. But who is to blame?
Let’s leave blame aside for a moment and check out the numbers first.
“It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.”
– Franklin Delano Roosevelt
One of the key features of the time we live in is paralysis. Uncertainty creates risk aversion, since risk is much more difficult to calculate. After a few years living like this and people start to live day to day. It eventually becomes “survival mode” when tomorrow becomes very difficult to imagine. The result is nothing – and that often comes even when one person is calling the shots, let alone a system based on consensus among many.
The evidence is all around us that something unusual is happening. Change is coming faster and in ways that are not often talked about adequately. The economy is not simply recovering the way it has after any other post-war recession. What should we do? FDR had it right – try something and see if it works. If that goes against every instinct you have right now, you’re not alone. But let’s see if we can convince you that there are, in fact, some things that point to very different actions than we’re all used to.
The Dow Jones Industrial Average (DJIA) is down for the third straight day. News outlets that have to attribute it to something attribute it to “global tension,” which does appear to be running a bit higher than usual. But the entire exercise of watching an index from one day to the next is a bit silly from the start.
A more interesting question asked by some commentators is, “Does this mean that the bull market is over?” The short answer is no, it doesn’t, but not for the reasons that most people think. The reality is that we have been in a secular (or long term) bear market since 2000, roughly the start of what we call a “Managed Depression,” and this small correction is nothing but a regression to the mean that proves it.
If you want to know the future, ask the kids. It’s going to be their world one day and you can expect that it will be made in their image. Their attitudes, values, and goals will become what drives the economy once they kids of today become the parents and leaders tomorrow.
That’s why UBS asked Millenials (born 1982-1999, or currently 15-32 years old) about their financial and life goals. This is the generation that has been described as narcissistic, broke spenders among other things. If you believe that line, think again. The young people today are one of the most conservative generations yet financially, valuing happiness and security far more than a big pile of cash.
This describes our future, certainly, but more importantly it fits perfectly into the main reason why there are economic and business cycles in the first place.
2017 is still over three years away, but we can already say a lot about it. We know that there will be a new President, although it’s not clear yet which party has the edge this far out. It’s likely that whoever is elected she (as it well could be) will try very hard to take the partisan edge off of Washington and get things done. There may even be a new Congress by then with a completely different configuration. But as big as the political changes are likely to be, the real change will be away from Washingtoon.
That will be the year that the peak Baby Boomers, born from 1952-1959, hit 65 years old and start to retire. Ahead of them are at least 15 million Boomers who will have passed that threshold, with probably 10M or more retiring. With slow growth inflation should still be low and unemployment will suddenly and sharply decline. The Millenial Generation will hit the workforce (and the electorate) in a big way. Combine that with the rising optimism coming on slowly and the boom should fire up.