Economy

Trade Grows—Without the U.S.

“…a closer look at just how global trade has been re-aligning suggests that it’s likely to keep growing with or without us – and increasingly, it’s without us. Globalization is alive and well, regardless of whether the trade routes run through the US. And if an ‘America First’ White House does start to retrench and retreat, there’s a good chance the biggest loser will be America itself,” Parag Khanna writes for Politico.

“An example already in the public eye is Obama’s signature international economic effort, the Trans-Pacific Partnership (TPP). With the previous administration unable to push it through Congress and Trump ditching it in one of his first executive orders, most of the other signatories are moving ahead anyway in a ‘TPP minus one’ format. Even more significantly, more than a dozen Asian countries have rekindled their efforts towards advancing an alternative megadeal – the Regional Comprehensive Economic Partnership (RCEP) – which differs from TPP in one crucial way: At the center lies not the US, but our economic arch-rival China.”

How Immigrants Are Helping Detroit’s Recovery

The Economist: “‘We are proud of our Muslim community in Michigan,’ says Rick Snyder, the state’s Republican governor, sitting in his office in the grandiose Cadillac Place, the former headquarters of General Motors. Ever since his first state-of-the-state address in 2011, Mr Snyder has emphasised the importance of welcoming people from across the world to this large midwestern state.”

“Mr. Snyder and Mike Duggan, the mayor of Detroit, are making population growth a gauge of their efforts to revitalise a state that is slowly recovering from a ‘lost decade’ and a city devastated by the largest municipal bankruptcy in American history. Between 2000 and 2010 Michigan lost nearly 800,000 jobs, income per head fell from America’s 17th-highest to 39th, and residents fled. In the same period the population of Detroit, a city built for 2m, plunged to just over 700,000. By the start of the next decade the city’s roads had fallen into disrepair; public schools were among the worst in the country; thousands of households had no running water and tens of thousands of building plots were derelict or vacant.”

“In his most recent state-of-the state address last month, the governor set the goal of reaching 10m state residents again in the next three years. He proudly pointed out that, in the past six years, Michigan had gained 50,000 new people. ‘Immigrants account for all of that population growth,’ explains Steve Tobocman, head of Global Detroit, a non-profit organisation promoting immigration.”

The Next Financial Crisis Might Be in Your Driveway

Bloomberg: “Lured by low interest rates, low gas prices, and a crop of seductive vehicles that are faster, smarter, and more efficient than ever before, American drivers are increasingly riding in style. Don’t be fooled by the curb appeal, though—those swanky machines are heavily leveraged.”

“The country’s auto debt hit a record in the fourth quarter of 2016, according to the Federal Reserve Bank of New York, when a rush of year-end car shopping pushed vehicle loans to a dubious peak of $1.16 trillion. The combination of new car smell and new credit woes stretches from Subarus in Maine to Teslas in San Francisco.”

“Another way to look at: Every licensed driver in the U.S., on average, owes about $6,100 in car payments.”

Here Comes the Next Wave of the U.S. Oil Boom

“U.S. oil companies didn’t merely survive OPEC’s attempt to drown them in low prices. The energy industry is emerging from this dark period of bankruptcies and job cuts much leaner and ready to thrive, even at prices that were once too low,” Matt Egan writes for CNN Money.

OPEC’s decision in November to abandon its strategy of flooding the world with excess supply allowed oil prices to stabilize above $50 a barrel. That bottom in prices has allowed the U.S. shale oil producers that have driven the boom in American oil production over the past decade to once again start pumping more oil. And many have even started to rehire some of the thousands of workers laid off during the downturn.

The Biggest Economic Issue Facing America Is Not Job Creation

Quartz: “The biggest economic issue for the future is closing the skills gap and retraining workers who have been displaced from their old jobs that have been automated. Both the US unemployment rate and the total job openings have been relatively unchanged in the past year. The unemployment rate in January was 4.8%, down only 0.1% from the same time in 2016. The total job openings were 5.5 million in Dec. 2016, up from a mere 100,000 the same time in 2015. We simply don’t have people with the right skills to fill millions of jobs, yet many of them are still underemployed or living in poverty.”

“The problem is that one in every five adults globally has no formal education, which is a total of 682 million people, and jobs that require formal education are the ones expected to grow by nearly 8% in the next seven years.”

The Damaging Impact of the Relentless Pace of Automation

MIT Technology Review: “The White House report points in particular to the current wave of AI, which it describes as having begun around 2010. That’s when advances in machine learning and the increasing availability of big data and enhanced computation power began providing computers with unprecedented capabilities such as the ability to accurately recognize images. The report says greater deployment of AI and automation could boost economic growth by creating new types of jobs and improving efficiency in many businesses. But it also points to the negative effects: job destruction and related increases in income inequality. For now at least, ‘less educated workers are more likely to be replaced by automation than highly educated ones.’ The report notes that so far automation has displaced few higher-skill workers, but it adds: ‘The skills in which humans have maintained a comparative advantage are likely to erode over time as AI and new technologies become more sophisticated.'”

“The problem is that the United States has been particularly bad over the last few decades at helping people who’ve lost out during periods of technological change. Their social, educational, and financial problems have been largely ignored, at least by the federal government. According to the White House report, the U.S. spends around 0.1 percent of its GDP on programs designed to help people deal with changes in the workplace—far less than other developed economies. And this funding has declined over the last 30 years.”

The Next Big Blue-Collar Job Could Be Coding

“The Valley employs only 8 percent of the nation’s coders. All the other millions? They’re more like Devon, a programmer I met who helps maintain a ­security-software service in Portland, Oregon. He isn’t going to get fabulously rich, but his job is stable and rewarding: It’s 40 hours a week, well paid, and intellectually challenging. ‘My dad was a blue-­collar guy,’ he tells me—and in many ways, Devon is too,” Clive Thompson writes for WIRED.

“Politicians routinely bemoan the loss of good blue-collar jobs. Work like that is correctly seen as a pillar of civil middle-class society. And it may yet be again. What if the next big blue-collar job category is already here—and it’s programming? What if we regarded code not as a high-stakes, sexy affair, but the equivalent of skilled work at a Chrysler plant?”

Can Trump Harness the Private Sector to Stop Violent Extremism?

Eric Rosand and Alistair Millar: “Donald Trump campaigned on the promise that he would use his legendary business experience to solve the most pressing problems facing the United States and its interests abroad; stocking his cabinet with CEOs from corporate America has only raised expectations that he can deliver on this promise. As commander-in-chief, how will President Trump use his commercial know-how to tackle the problem of violent extremism? Will he—complemented by the wealthiest, most pro-business cabinet in U.S. history—do what his predecessors have failed to do and get the private sector to really step up?”

The Places in America Most Vulnerable to a Trade War

Washington Post: “The effect of a trade war on U.S. communities could be significant and widespread, according to research from the Brookings Institution’s Metropolitan Policy Program. Nearly 6 million U.S. jobs are directly tied to exports. Another 6 million are indirectly tied to trade — for example, the driver who transports a truck load of widgets to the port.”

“The Brookings data ranks the cities that are most dependent on exports and with the most export-related jobs. Small Midwestern cities that export auto parts and other manufactured goods appear high on the list, as do coastal cities that export chemicals and petroleum byproducts.”

Is the U.S. Economy Too Dynamic, or Not Dynamic Enough?

New York Times: “The economy has become too volatile and uncertain. Perhaps the dissatisfaction is driven by globalization, automation and the decline of employers’ implicit promises to offer workers jobs through thick and thin. These factors have made it harder for people to get good-paying jobs and to hold onto them for decades. High levels of inequality mean many of the benefits of growth don’t accrue for people at the middle and bottom of the pay scale.”

“Robert Johnson, the president of the Institute for New Economic Thinking, argues that the cumulative impact of rapid technological change and shifts in work can have downsides that economists should try to account for more rigorously… In short, one could summarize this set of complaints as the economy’s having become too dynamic for its own good.”

“But a different line of research offers an alternate theory.”

“A new report from the Economic Innovation Group, a research outfit funded largely by technology executives, suggests that the real problem isn’t too much dynamism but too little. The authors describe trends that have blocked the formation of new businesses and jobs and that are having a stultifying effect on the economy.”