War Room 29 August 2012
Jobs + Inequality
War Room
•Monthly macro discussion
•Using tools in context
•Update on HiddenLevers Features
•Your feedback welcome
Jobs + Inequality
I. Jobs Picture: Current Snapshot
II. Comparative:Post-Recession Job Recoveries
III. Market Inequality
IV. Scenarios
HiddenLevers
JOBS PICTURE: CURRENT SNAPSHOT
Current Snapshot: Long Way To Go
Still 5 million jobs from peak
Unemployment claims:
• decreased significantly since 2009 peak
• Currently not decreasing
• Currently equal to peak of 2001 recession
Current Snapshot: Jobless Claims Now at 2001 Highs
450k
Current Snapshot: Muddling Through
upticking unemployment this summer
unemployment downconfidence up
approaching 2008 lows
Current Snapshot: Recovery + Demographics
Singles• 5 million jobs lost – 90% recovered
Married• 6 million jobs lost – 22% recovered
COMPARATIVE:POST-RECESSION JOB RECOVERIES
HiddenLevers
Comparative: Post-Recession Job Recoveries
source: Bureau of Labor Statistics
Qualitative:Character of recovery similar to 1990 + 2001
Quantitative:% job loss dramatically more
Comparative: 2000s = Jobless RecoveryLosers- Manufacturing- Automotive
Winners- Professional
services- Healthcare
MARKET INEQUALITYHiddenLevers
(Rich Kids of Instagram)
Inequality – Top 1% versus The Rest
Takeaways- excluding top 1%, income inequality has not risen over past 20 years- system that works well for richest, doesn’t for the rest- Income share for top 1% is at Great Depression era highs
Source: Economic Policy Institute
Fortune 500 CEOs• CEO/worker pay ratio has risen exponentially – 20x in 1965 to 200x today • CEO pay has accelerated even faster than top 1% income• Shareholders could affect things – vote down CEO packages• Winner-take-all
Ratio of CEO to Worker Compensation: 1965-present
Inequality – Part of General Trend?
Inequality – Part of General Trend?
Baseball Salaries• Average MLB salary up 100x since 1970• Median wage across all pro-athletes = 40k (minor leagues)• Winner-take-all
Startup Billionaires• Startups not creating jobs, creating wealth for few• Automation = key to many startups success, but eliminates jobs• Winner-take-all
12 employees1b usd acquisition
67 employees1.65b usd acquisition
Inequality – Part of General Trend?
Inequality – Russell 2k vs Mega CapsTop 8 Firms outperformed over last 20 years
Mega Caps outperformed small caps (and S+P) over last 20 years.
All but Apple were huge companies 20 years ago – no cherry picking here
Apple demonstrates inequality markets• iPhone is king of smartphone market• iPad has even greater share of tablet space• Winner-take-all
Apple - Outlier or new Paradigm?
Future: Automation + Change in Workforce
Examples:
Tesla - new factory uses robots + few humans
FoxConn - automating iPhone factories in China, use 90% less workers
Amazon – automating logistics, new warehouses devoid of humans
Philips – robots replacing workers to make consumer electronics devices
Technology + Automation = Spoils to go to a few, companies and individuals
Ford Factory 1925 - humans Tesla Factory 2012 - robots
they don’t need me anymore
What are the effects of continued automation on the workforce?
Pessimists: Once a robot can do everything an unskilled laborer can do, and better, what happens to mass unemployed? If a robot can serve you fries, what's the purpose of a minimum wage worker?
Optimists: We've been through this transition before: 19th century Industrial Revolution, 20th century rise of services and information economy – this is just creative destruction at its best.
These trends are far reaching – too early to model scenarios here.
Future: Optimistic and Pessimistic Scenarios
HiddenLevers – Product Update
• Macro Profile for a Portfolio (print to PDF)
• War Room – now on iPad
Coming soon:
• iPad App (beta)
• Big Screen Presentation (beta)