Are the trades returning to economic prominence?
Before America evolved into the current economic high technology, with even robotics on the verge of a major leap forward, the need for repair, maintenance, and upgrading for established commercial and industrial building, plus the millions of houses that had already sprouted up, was taken care of by the trades.
These were once an honored segment of the nation’s economic structure in supplying the millions of existing factories and homesteads with upkeep and components. In fact, thousands of high school graduates chose the specialized technical trade schools in order to be prepared for their life’s work as mechanics, painters, plasterers, latherers, and all the specialties needed for the optimum functioning of existing facilities that were becoming numerous.
However, as societal recognition has become an ever greater factor, the position of this irreplaceable sector on the ladder of economic necessity has been downgraded by the media propaganda and other sources of influence.
In this maelstrom of changing social behavior, those working with their hands were consigned to a secondary status, not worthy of the social standing of bankers, financiers, lawyers, architects, engineers, and all those that did not have to involve themselves with the necessity of critical handwork.
Unfortunately, this made a substantial impact on the generations making their appearance in the latter part of the 20th century. It led to the closing of practically all of the nation’s technical schools, since the impressionable new generations were taught liberal arts as the educational medium for future success.
This misleading direction has played a major role in creating a large supply of untrained college graduates who may have become more adroit sociopolitical thinkers, but for whom few job openings exist in today’s highly competitive job markets.
Hopefully, the swing toward economic necessity, rather than overemphasis on social standing, is currently registering with potential high school graduates who don’t enjoy unemployment while being subsidized by the government — or being forced to continue to live with their parents.
Whether the emphasis on “making America great again” will do its part in restating economic reality will soon be known as new employment opportunities arise.
Will housing shortages become an increasing recovery factor?
With labor force participation and the active unemployment rates reflecting positive levels not seen since the 2008 outburst of the Great Recession, tens of thousands of post-millennials are moving out of the family homes they had to share with their parents during the unemployment blight.
Whereas finding a home of their own was a primary objective of college graduates as well as others coming of age, the financial depression necessitated the need for the intense home construction growth of the second half of the 20th century and the early years thereafter.
While rentals took some of the pressure off the late teens and early twenties, for the majority who were in the process of family formation, the dearth of new home construction became a multi-year factor, despite an active U.S. population growth. While new construction of single family homes had reached levels as high as 1.6 million per annum prior to the Great Recession, recovery levels currently are struggling to meet the 1 million mark yearly.
But as President Trump’s primary objective of intensified U.S.-based manufacturing production has begun to manifest itself, the shortage of single-family homes in all parts of the nation, and additional rentals in the big cities, is looming ever larger.
Despite the fact that mortgage interest rates are creeping up, the higher anticipated employment levels and commensurate wages will generate an increasingly higher level of housing demand. Additionally, the long overdue nationwide trillion-dollar infrastructure anticipation will put intense pressure on the available trades capability of tens of thousands who have drifted into other fields of endeavor making plumbers, mechanics, plasterers, latherers, contractors, etc. even more unavailable.
Many of the tens of millions of unemployed individuals who had to ride out the past decade of job shortages are now at retirement age and not prepared to go back to work. This means that the upsurge of rentals in the big cities, and the cost of new homes throughout the nation, will likely reach new high levels.
It is safely predictable that a year from now, unemployment, low-price housing, and reasonable rentals will be replaced by just the opposites in each case. With “Made in America” will come substantially higher prices, unfilled job openings, and increasing residential shortages, together with an overall prosperity not seen in the U.S. since the post-World War II era.
Upcoming inflationary impact will be increasingly intense
An analysis of President Trump’s remake of America’s economic direction indicates substantial employment increase, tougher trade negotiations, and the first new overall tax structure in 30 years.
While it is very likely that these objectives will be achieved due to the people-oriented power of President Trump’s forcefulness, the major downside of the country’s major economic reorganization will be a substantial cost factor. Its impact had been greatly diminished by the previous shift of production from “made in America” to the “lowest cost” available worldwide.
Unlike the 1980s Reagan economic revitalization, which brought costs down by opening America’s doors to lower prices and deflationary results through focusing on the best interests of the consumer, Trump’s approach will force re-employment and “made in America” by legislation, penalizing comparable foreign goods.
Even before Trump was inaugurated, the strength of his personal presence reversed a number of decisions, like that of Ford Motor Co. and Carrier Corp., to go “foreign.” It’s no secret that multi-faceted conglomerates have shifted much of their companies’ factory operations overseas to bring costs, including taxes, to much lower levels to favorably accomplish this. They counted on America’s gigantic consumer sector support, which gained approval from both the political establishment, and the bulk of stock market investors, as well as householders.
But like all one-sided economic objectives, this has resulted in the closing of U.S. factories and putting tens of millions out of work, and depending on the largesse of food stamps. And with accelerating technology causing even greater job losses, this major downturn in working America has created a crisis that helped elect Donald J. Trump as president.
This shrinking employment capacity was further aggravated by climatological purity and regulatory restrictions, plus elevated minimum wage levels that caused both large and small business enterprises to severely cut back.
While President Trump’s mandates will be cheered by the employees of the industrial states, like Pennsylvania, Michigan, and Wisconsin, and the mining states such as West Virginia and Ohio, the increased costs of forcing “made in America” production could result in much higher inflation and interest rates a year from now.
This, unfortunately, has always been the result of attempts to resolve the extremes of business growth and unemployment with forcing such production back to within national boundaries.
Does Amazon sound a shopping center death knell?
Whereas Sears Holdings Corp. and its prolific catalogue distribution once dominated a big chunk of U.S. retail commerce, the owners are officially indicating its potential demise in the foreseeable future.
It’s no coincidence that the incredibly fast and comprehensive spread of Amazon’s all-time-high merchandising empire is spreading at a never before experienced pace. Although Jeff Bezos’ retail marketing empire is repeatedly setting accelerating records, its monetary success is providing the lubricating capability for a non-ending dominance over the U.S. consumer sector shopping segment.
It’s becoming axiomatic in e-commerce that the more shoppers Amazon lures, the more retailers and manufacturers want to sell their goods on that digitally-inspired method of purchasing.
This method gives Amazon more cash for new services, such as two-hour shipping and streaming video and music, which entice more shoppers. This, in turn, allows Amazon to invest in even more services, which brings in another wave of customer additions.
With a constant spread of additional services, such as the firm’s voice-activated assistance support solidifies the consumers’ confidence in any future approaches that Amazon brings to their attention. While this previously unknown commerce blitzkrieg continues full-force, Amazon’s self-financing would seem to be unstoppable in the immediate future, as Amazon’s expansion appears endless.
According to Amazon’s spokespersons, this includes logistics firms, search engines, social networks, food manufacturers, and producers of physical, digital, and interactive media of all types. Many of these services support Amazon’s future expansions and that of other companies, which power Amazon’s current operations, as well as those of other firms. Amazon also rents warehouse space to other sellers, such as a $1.5 billion air freight hub in Kentucky. It is also testing technology in stores to let customers skip cash registers altogether and experimenting with drone deliveries to homes.
This head-spinning variety of innovations, such as those already made functional, have given Amazon a market capitalization of $400 billion, the fifth most valuable firm in the world. Whether such heady growth in the future justifies an eventual doubling of this post year 2000-founded corporate “miracle,” the next decade will tell.
Do record investment loans reflect overconfidence?
When margin debt hit an all-time record high in February ($528 billion) in borrowing against investors’ stock and bond market brokerage accounts, it sent a signal that the vast U.S. investment community was becoming increasingly confident in the Trump long-term economic leadership.
While the November 2016 stock market upsurge was propelled by the popularity of President Trump’s solid Electoral College win, the first quarter 2017 equity/bond market’s new upward wave indicated approval of the U.S. economy’s growth opportunities in the foreseeable future.
Despite the hard-fisted resistance to Trump’s border-closing initiatives and difficulty in revamping the overall Obama healthcare fiasco, the U.S. investment community is becoming increasingly optimistic in not wanting to miss out on an overall rebuilding of America’s industrial/commercial sector. There is increasing confidence in all the benefits derived from the thousands of companies, big and small, whose growth will be accelerated by the innumerable components comprising this commercial/industrial growth.
After another lackluster year of a 2% growth factor in 2016, many sophisticated investors believe a Reagan Administration-like spurt, reaching as high as 4% or more by 2018, is in the cards.
While caution is always advised when optimism runs rampant, the purchasing power of vast new investment funds available will in itself hike stock and bond prices in 2017’s second half.
If it appears more than plausible that a retrenchment of trillions of U.S. overseas dollars, a meaningful new tax structure, the end of death taxes, and fossil fuel energy growth reaching new heights, a doubling of the drab gross domestic product growth results of the past 16 years may not seem overly optimistic.
As in all previous equity/bond market “booms,” the growing confidence of the vast U.S. financial community and its millions of participants will set the tone and extent of such growth. But with the memories of past false promises by previous presidents continuing to cast dark shadows, the tangible success of Trump’s economic promises will be necessary to intensify the reversal of past failures. Although dished up by the Obama years and its lack of economic dynamics, their genesis goes back to the turn of the current century.
Is FRB action accelerating interest rate tightening?
While America’s central bank, the Federal Reserve Board, was instrumental in bringing interest rates down in order to reverse the commercial banks’ plight during the Great Recession by buying up mountains of almost worthless mortgage-backed security derivatives, the Fed is now starting to lighten its load.
Although Chair Janet Yellen’s earlier announcement that the Fed would limit its fed fund rates increase to three times this year, the size of the FRB’s potential dumping could have a major negative effect on an early refinancing boom, unleashed by Yellen’s clarification.
When the Fed, at the direction of then chairman Ben Bernanke, was actively involved in their Q1, Q2, Q3, and Q4 buy-up programs, commercial interest rates hit a new multi-year low, energizing a potential refinancing boom of all types of residential, commercial, and industrial properties.
But in doing so, the Fed balance sheet, controlled only by its twelve-person board of directors, saw its holdings swell from a historical average of $500 billion to $4.5 trillion earlier this year. This now puts the Fed in the ticklish position of how fast and by how much the Fed’s reserves will be reduced.
Earlier indications had already signaled that the FRB was ending its significant purchasing program, in consonance with its upsweep of fed funds’ interest rates.
The timing and size of the Fed’s reduction will have a significant effect on the speed and size of the U.S. refinanced recovery. This situation will be further complicated by the Trump Administration’s upgrading of a monumental tax structure that has suffered the obsolescence of non-renewal for the past 30 years.
Although the Bernanke Fed was rightfully commended for its part in ending and reversing the Great Recession, it did so with the singular objective of halting this disastrous slide. The current Federal Reserve Board has the unpleasant role of deciding whether, and how fast, to unload the multi-trillion-dollar load it incurred in breaking the Great Recession’s back.
Since the possibility and actuality of this move continues to exist, it will have a deterrent effect on the speed and scope of the nation’s refinancing surge, which limited fed fund increases seemed to signal. But as early subsequent events are indicating the Fed’s speed and size of its overloaded balance sheet dissolution will remain extremely sensitive to its effect on the recovery of a turgid economy.