Mish's Global Economic Trend Analysis

Message to 5.7 Million Truck Drivers "No Drivers Needed" Your Job is About to Vanish; Time Marches On, Fed Resistance is Futile
Job Growth Trends by Type of Job and Part-Time Status
Japan Near Stagnation Following 9 Months of Growth; Service Sector Prices Back in Deflation; Spotlight on Abenomics

Message to 5.7 Million Truck Drivers "No Drivers Needed" Your Job is About to Vanish; Time Marches On, Fed Resistance is Futile

Posted: 05 Aug 2013 09:42 PM PDT

Over the next two decades, machines will drive themselves and 5.7 million truck driving jobs will vanish.

Many pooh-pooh that idea for insurance reasons, but costs savings and improved technology suggest the trend is inevitable.

Please consider the Wall Street Journal report Daddy, What Was a Truck Driver?

Ubiquitous, autonomous trucks are "close to inevitable," says Ted Scott, director of engineering and safety policy for the American Trucking Associations. "We are going to have a driverless truck because there will be money in it," adds James Barrett, president of 105-rig Road Scholar Transport Inc. in Scranton, Pa.

Economic theory holds that such basic changes will, over time, improve standards of living by making us more productive and less wasteful. An idle truck with a sleeping driver is, after all, just a depreciating asset.

"Holy s—," exclaims Kevin Mullen, the safety director at ADS Logistics Co., a 300-truck firm in Chesterton, Ind. "If I didn't have to deal with drivers, and I could just program a truck and send it?"

Roughly speaking, a full-time driver with benefits will cost $65,000 to $100,000 or more a year. Even if the costs of automating a truck were an additional $400,000, most owners would leap at the chance, they say.

"There would be no workers' compensation, no payroll tax, no health-care benefits. You keep going down the checklist and it becomes pretty cheap," adds Mr. Barrett of Scranton, who says he can't find enough drivers.

Safety is why so-called "closed-course" uses, which keep automated trucks away from the public, are happening first.

In an Australian mine, in a scorched, wretched area called The Pilbara, Caterpillar is today running six automated model 793f mining trucks. Stuffed with 2,650 horsepower and more than 25 million lines of software code, they haul away layers of rock and dirt, up and down steep grades. Traditionally, these trucks would require four drivers to operate 24 hours a day.

Today the trucks use guidance systems to run on their own, only monitored by "technical specialists" in a control room miles away. If an obstacle appears in its path, the trucks have enough onboard brain power to decide whether to drive over or around it.

In addition to safety risks, human drivers "will often make judgments, most good, but some bad, and those inconsistencies can lead to problems," says Ed McCord, the Caterpillar executive in charge of the program. Automated trucks never flinch, he says. "If it's supposed to be in fifth gear coming down a grade, it will be in fifth gear every time.

Eventually there will be 45 of these trucks on site, eliminating most of the need for 180 driving positions, according to Mr. McCord. The fewer remaining jobs, he said, pay better but be more technical — at their core, about software.

One day, your grandchildren will be wondering, as they do about the rotary phone and the VCR. "Truck driver! What was that?"

What will you tell them?

No Drivers Needed

The Trucker's Report had excerpts of the WSJ report in ATA: Self-Driving Trucks Are "Close To Inevitable"

A couple of paragraphs in the article stood out.

"People come up with these grandiose ideas," says Bob Esler, a commercial trucker for almost 50 years. "How are you going to get the truck into a dock or fuel it?"

And then there's loading and unloading. Pre-trip inspections. Signing for drop-offs and pickups. Making sure cargo is properly secured. Making sure the cargo that's being loaded actually gets loaded. The list just keeps going on and on.

Bury Your Head in the Sand Mentality

Comments to the article show that truck drivers refuse to accept reality.

James: Put truck drivers out of work, you're going to have an unemployment crisis on your hands that will make America's Great Depression look like a Wall Street blurp. Leave us alone, already? Please?

James: We're guys and gals just out here trying to do a job. And like it not, America needs us. Like, seriously, maybe try to figure out ways to support us, instead of trying to figure out new ways to regulate us, and now worse, trying to figure out ways to get rid of us. Address the real problems, and just please, leave us truckers alone.

Poli: C'mon guys even if they make it work, comes up some crazy guy with few thousand dollars buy one Russian 150 miles radius GPS/communication jammer and you'll see how many deaths in one minute!!

Hotrod: Are you kidding me? With all the glitches and failure of computers you would have more accidents than ever.

Andrew: And in the beginning, self piloted trucks will all slam into a low clearance bridge in Chicago because the programmers forgot to take into account truck routes in various cities.

Angelo: This is a fantasy and nothing more until we arrive at the "George Jetson" generation. The infrastructure doesn't exist as it took 200 years to build the existing model which is certainly not designed for it, nor can it be retrofitted for such an endeavor.

Kay: I doubt it will happen in our lifetime. There are too many critical components to driving a truck on the road. Decisions have to be made by humans, not machines. If they can ever create a robot with a mind as complex and brilliant as humans and with the dexterity of arms and legs then they might be able to have automated-driving trucks. We aren't there yet and we won't be for another 30-50 years, IMO .

Alchemist: Who will have money to buy the products these automated trucks are hauling? I'd like to know how they expect to sell anything to the vast nation of jobless, impoverished obsolete humans?

One person understands and offered this set of comments

Jon: Of course trucking companies are excited about this. So should everyone else. Passenger cars will get the same treatment, just a little slower. Yes us truck drivers will be out of a career. Welcome to the world of technological advancement. It happens to all professions eventually. Get used to the idea.

Jon: [In response to Kay and others] Kay, that just shows you lack vision and imagination. It will be here in a decade. I assure you. The roads will be safer. Fueling? Self-driving trucks will go to full service truck stops. You'll have some guy pumping gas making minimum wage. How's that for a blast from the past? Dexterity of arms and legs? The truck drives itself, you can even sit in the drivers seat while it does it. You can't just say "gee that sounds bad, therefore it won't happen".

Time Marches On, Fed Resistance is Futile

The natural state of affairs is deflation, not inflation because of productivity improvements.

Farming is a good example. Because of productivity improvements in farm equipment, and of genetic improvements such as drought resistance, it takes far fewer people to grow corn wheat, and other agricultural products as it did even 15 years ago. Compared to 50 years ago or 100 years ago the difference is massive.

And so it goes. Planes will be pilotless and trucks driverless. The result will be fewer skilled jobs but cheaper prices.

Bernanke's 2% Inflation Goal

Achieving 2% annual inflation creates numerous problems as noted in Bernanke Wants 2% Inflation in a Deflationary World; Who Pays the Price?

The Fed wants home prices up to help out the banks, but what about the new household formation? And what about student loans and the ability to pay those loans back?

And think about how cheap money allows corporations to borrow money for next to nothing to buy technology to replace humans with hardware and software robots.

Trends noted by PEW and predicted in this corner at least six years ago are structural long-lasting trends.

Those expecting a huge pickup in inflation, a spike in US GDP, or a big boom in housing based on misguided perceptions of "pent-up housing demand", fail to understand how Fed boom-bust and bank-bailout policies preclude such outcomes.

Disastrous Fed Policies

Deflation is a good thing. Who doesn't want cheaper prices? Deflation only seems bad because of the enormous amount of debt that cannot possibly be paid back.

Young adults cannot afford to get married, and they certainly cannot afford a house. Household formation is on the decline because of student debt and declining real wages.

And the Fed is directly responsible for declining real wages. Fed policies also fuel the income inequalities of the 1% vs. the 99%.

Who Benefits From Inflation?

The Fed is fighting the deflationary trends of technology, battles it cannot win. Real wages have not and will not keep up as asset bubbles in stocks and equities get bigger and bigger.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Job Growth Trends by Type of Job and Part-Time Status

Posted: 05 Aug 2013 10:37 AM PDT

Here is an interesting chart by reader Tim Wallace that shows growth on jobs in five distinct job categories: Construction, Manufacturing, Hospitality, Retail, and Government.

click on chart for sharper image

Wallace Comments

On Government Jobs: "Remember, this is only direct government payrolls, local, county, state and federal, and does not include the millions of contracted positions from privatization. I am still trying to find a reputable way to extract those numbers. Note the steady, steep growth in government jobs over the years, only dipping and then going flat in 2009. The growth in working age population since 1939 is about 150%, the growth in government jobs about 440%. This is more than a little skewed.

On Construction Jobs: Construction staffing levels go back to May of 1997. Since then the working age population is up by 43 million, a 21% population increase, with no increase in construction jobs.

On Manufacturing Jobs: Manufacturing jobs are now back to the levels of February 1946. Since then, working age population has increased by 144 million. Manufacturing jobs peaked around June of 1979 at 19.6 million and was about 17.3 million in early 2000. Manufacturing jobs now total approximately 12 million.

Additional Charts From St. Louis Fed

click on any chart for sharper image

Total Nonfarm Employees

Leisure and Hospitality: Total

Leisure and Hospitality: Food Service and Drinking Establishments

Of the total increase in L&H jobs, most were Food Service and Drinking Establishments jobs. These are typically low paying, part-time jobs.

Education and Health Services

Education and healthcare was a big winner in the recovery and even before. Some of these are well paying jobs such as nurses and some teaching positions. Other jobs in this sector are very low paying.

Retail Trade

These jobs tend to be low paying part-time jobs as well.

Part Time Job Growth

Finally, here is a chart from Doug Short at Advisor Perspectives on Part-Time employment.

Click on the preceding link for additional charts and analysis.

Doug comments and I concur "It is certainly possible that the Affordable Care Act (aka Obamacare) is playing a role in employer decisions about full-time versus part-time employment. The $2,000 per employee penalty for employers who do not comply with regulations has influenced some employers to begin shifting their employment policies. Last month the government pushed the start of the penalty from January 2014 to January 2015. But the anticipation of the penalty, even though delayed a year, will probably continue to influence the interim decisions of private employers."

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Japan Near Stagnation Following 9 Months of Growth; Service Sector Prices Back in Deflation; Spotlight on Abenomics

Posted: 05 Aug 2013 07:24 AM PDT

The pace of growth in Japan slowed to a crawl as new orders stagnate as noted by the Markit Japan Services PMI™ for July.

Key Points

Weakest rise in service sector activity in nine months

Services employment and new orders broadly stagnate

Ninth successive month of higher input prices in the service sector

Summary

The latest data for Japanese service providers indicated that the expansion evident in previous surveys continued in July, but the pace slowed. Business activity increased only marginally, whilst new business and employment stagnated, in each case ending eight-month sequences of growth.

The headline seasonally adjusted Business Activity Index fell in July to 50.6 from 52.1 in June. Whilst this was the weakest increase so far in the current period of expansion, July marked the continuation of a nine-month run of growth, the longest ever recorded in the series.

Employment

Service sector employment stabilised in July, following eight months of expansion. Anecdotal evidence indicated that increased production, and expansions in sales teams, had compensated for strategic reductions in payroll numbers. The Composite Employment Index fell marginally, to the lowest level recorded since October 2012, and signalled a marginal drop in staffing levels.

Inflation

Input prices for the service sector continued to exert inflationary pressure as they rose for the ninth successive month, though the pace of inflation eased somewhat.

Meanwhile, prices charged by Japanese service providers ended their short period of inflation, and fell marginally in July.

Abenomics and Inflation

I agree with the comments of Claudia Tillbrooke, Economist at Markit who said:

"The Japanese service sector continued its nine-month sequence of growth in July, but the rate of expansion weakened. This follows a period of particularly strong performance relative to the survey history. Whether the short period of recovery will continue remains to be seen; but with the latest data showing employment and new orders stagnating in July, the outlook is distinctly less positive than reported in previous surveys."

Note that input prices are still rising yet prices charged are back in deflation. There is simply no demand for services in Japan.

Recall that prime minister Shinzo Abe wants taxes to double the sales tax rate from 5% to 10% by 2015 which will further decrease demand.

Should additional revenue come in from the tax hike, it will serve (in isolation) to strengthen the Yen, something Abe does not want.

So Abenomics remains in the spotlight. What's he going to propose next if deflation in prices remains?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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