So I wake up this morning to news that manufacturing is still improving, unemployment is dropping, retails sales for December were more than good, consumer sentiment is up, and oil prices are down. Oh, and the market opened strongly to the downside. So what gives?
Financial stocks were the top decliners in early trade as European banks were pressured as investors worried about their ability to raise capital amid the debt crisis
I tried so hard at the end of last year to keep Europe out of this column, and now, just as 2012 begins, here it comes. Europe is like an elephant in the room – try as one might to ignore it …
I read an intriguing article from Technology Review (publisher: MIT) this morning. As a source of information regarding technological trends, well, one is hard pressed to find a more reliable source. The premise of the article is that a “tectonic shift” is occurring in America’s employment structure. New technologies are doing jobs that humans once did.
Today, 6.3 million fewer Americans have jobs than was true at the end of 2007. And yet the country’s economic output is higher today than it was before the financial crisis.
Although the above statistic is alarming regarding our current employment picture, it is not a harbinger of doom for the future employment picture. Once again, we have been here before. This is not the first time technological innovation has taken jobs from humans. As the Industrial Revolution gathered steam, for example, many jobs simply disappeared, replaced by machines and processes. One graphic example is the invention of the cotton gin. This simple machine effectively killed the need for cotton-picking humans in the south. Another is Henry Ford’s creation of the assembly line (mass production), which effectively put an end to hand crafting products. Although newspaper headlines from the time suggested a bleak future from the advent of machines, it did not turn out to be true. Instead, new industries arose creating a slew of better, high-paying jobs. The same is happening now, as the MIT article suggests.
That’s why fast-advancing information technologies, with their pervasive reach and potential to create new services and satisfy new niche markets, may be a better bet for job creation.
My point here is the jobs shift occurring may take some time to complete, but it will. In the meantime, there is enough “fuel” in the tank to keep the economic machine rolling. Keep in mind some 90% of America is still working, and as long as those folks feel okay about the economy and their lives, they will keep spending money. Q4 of 2011 is a clear demonstration this is true. The key to turning the transition to our favor is a new educational focus and job retraining, which is already happening throughout America.
As to the market and this transition, I suspect it will ride out the slow reduction in the unemployment numbers quite well. Simply, as I have said before, the market ultimately cares about one thing – corporate profit. So far, in the past two years, the high unemployment rate has not prevented corporations from making money. Corporate profits are at record levels, and their balance sheets are looking better than they have in many years. American corporations are doing just fine, and that will continue, as long as Europe does not implode.
Dang it! That stupid elephant in the room keeps blocking my rose-colored view of the world.
Trade in the day – Invest in your life …
