Automation the Answer?
America’s corporations are beating this quarter’s earnings expectations by habit, eleven years into the longest bull run on record. If we retrace our economic footsteps, however, it’s easy to see how investors got here.
For decades, a pair of raw hands became more and more productive. The trend looked never-ending, but then, all of a sudden, it did end. As the global financial system seized up in 2008, labor productivity was thrown completely off-kilt. The marginal worker stalled, and manpower has flat-lined ever since.
When Investors scratch their heads today at unstoppable stocks, low interest rates are usually given credit. With the cost of borrowing so little, business is booming because business is cheap. But when did low interest rates commence? As the global financial system seized up in 2008…
Short-term loan rates are a byproduct of long-term loan rates, and long-term loan rates are set by two things — inflation and growth expectations. If a worker produces diddlysquat per hour, the Federal Reserve’s growth expectations will dampen, and rates will come down.
However, in todays picture, wages are rising. Everyone’s in work, and firms want to put a lid on labor costs. In a year when the ROBO Automation fund can grow 20%, no worker is safe. FedEx is testing robots at its shipping facilities, Constellation Brands is packaging Corona through mechanization, and Citigroup is swapping the human for the Cloud. Is automation going to put productivity, growth expectations, interest rates, and the economy, on a different path? Food for thought!