Oct 22, 2018
Written by: Dr. Chris Kuehl
This has been a tumultuous year for economists and analysts. I realize this sounds a little lame given all the other stuff that takes place in the course of a year – everything from hurricanes to fires to crime and health scares but we have had our share of the unexpected and inexplicable. Some of this has been generated by a President that leaps in an out of economic issues in a cloud of tweets and leaves everybody wondering what just happened. But there have also been indicators that are not indicating what they used to and reliable theories that are suddenly not all that reliable. The big movements in the economy are making their way through – everything from exiting the age of the Baby Boomer to the rapid pace of robotics and automation. Just this week we said goodbye to yet another icon of the past as Sears finally seems to have succumbed to the inevitable. Where are we now at the end of 2018 and what does all this say about 2019.
It seems there are four major shifts underway and all four have been accelerating in terms of their influence on the economy. To contend with these will require a whole series of paradigm shifts that will affect how people live and work – not just in the U.S. but globally. First, there is the dramatic shift in labor and the impact it is having on many of the world’s economies. The separation of people by what they do for a living is creating a chasm where there once was just a gap. It is near impossible to have a successful career without extensive education and training. The days of hiring on to some manufacturer in order to learn a skill on the job are nearly over. The manufacturer, the construction company, the transportation company, and many others struggle to find qualified employees and don’t have the time and resources to train people from “scratch”. This currently means that companies struggle to find workers at the same time that millions of people are underemployed or working in jobs that do not allow them financial security. This will be a bigger issue in the years ahead due to a related shift.
Robotics and automation have been accelerating at an exponential pace. Not only are companies struggling to find the workers they need but they are also discovering that machines are capable of doing far more than was once possible. The robotic revolution may have started in the manufacturing sector but it has been spreading to health care and many service sector professions ranging from accounting to law and finance. The unskilled worker once worried about their jobs going overseas as their employer decided to outsource. Now they are losing their jobs to machines and robots and technology and these same machines are replacing the workers that once took the low skilled jobs away from people in the developed world. China has the fastest rate of robot adoption of any nation in the world.
A third major shift is taking place among consumers. The department store is dead and even Wal-Mart has started to lose its juggernaut status. The consumer has embraced the internet wholly and relies on sites like Amazon and Wayfair to meet nearly all their needs. This displaces a whole profession – retail clerks are no longer needed and those that remain are generally low paid and lack any sort of expertise past operating the cash register. Stores are abandoning clerks altogether as shoppers ring themselves up and food providers are going in the same direction. If the consumer completely abandons the brick and mortar operation it will make it almost impossible to exert trade pressure as the buyer simply goes directly to a purveyor in China who ships the product without it ever entering the U.S. merchandise flow.
The changes in the way that people make a living is creating what has been dubbed the “gig economy”. This makes the worker a free agent in somewhat the same way that a musician is. The best example of this new paradigm is the rideshare concept. The driver works when they want to and essentially operate independently. It can be a great opportunity but just as with any other “gig”, the threat is competition. The guy who was the only singer a club could book might charge a lot of money but when there are dozens arriving every day there is no more leverage – ask the legions of hopefuls that land in Nashville every day. The guy that made lots of money as an Uber driver three years ago now waits for an hour to get a passenger at the airport. Just as with the musician – now people need that day job or two or three and there are more and more people that have to work many “gigs” to stay ahead. This changes the relationship between employer and employee as there is no longer an expectation of a lifetime employment experience that ends with a gold watch.
The bottom line is that today’s economy is doing quite well but it is also right on the edge of a tectonic change or two and that makes looking ahead more than a little unnerving.
Dr. Chris Kuehl is a Managing Director of Armada Corporate Intelligence. He provides forecasts and strategic guidance for a wide variety of corporate clients around the world. He is the chief economist for several national and international organizations – Fabricators and Manufacturers Association, National Association of Credit Management, Finance, Credit and International Business and the Business Information Industry Association. He is also the economic analyst for several state accounting societies – Missouri, Kentucky, Tennessee, and Kansas.
Prior to starting Armada in 1999, he was a professor of economics and finance for 15 years – teaching in the US, Hungary, Russia, Estonia, Singapore, and Taiwan. He holds advanced degrees in economics, Soviet studies, and East Asian studies.
Chris is the author of Business Intelligence Briefs and Executive Intelligence Briefs – both publications from Armada. He is also responsible for the Credit Manager’s Index from NACM and Fabrinomics from the FMA.