Job Growth During the Trump Administration and Beyond

In the last year, the number employed has gone up 1.8 million but the number in the labor force has gone up only 1.1 million. Because the number employed has gone up faster than the number in the labor force, the unemployment rate has dropped (from 4.7% to 4.3%).

Since 1983, the unemployment rate has been lower than its current 4.3% just 5% of the time - and all of that between 1999 and 2001. Outside of that period, it's never been lower than it is now.

So what does that mean when it comes to forecasting job growth? It means that at some point between now and the end of 2018, the unemployment rate will be as low as it can go. At that point the rate of job growth will be limited by the rate of labor force growth.

Labor force growth in the last year has been nearly 100,000 a month. (And shrank by more than 400,000 people in May as baby boomers retired and fewer Americans looked for work.)  During the recovery from 2011 to 2016, job growth averaged 203,000. That gap is not sustainable at full employment.

This makes a couple of things predictable for the Trump term.
1. Job growth in the first four years of Trump's administration will be about half what it was in the last four years of Obama's administration. (Closer to 100,000 jobs a month than 214,000).
2. We will have our first month of negative job growth within the next 18 months. (Simply put, given normal variation, a median value of 100k is far more vulnerable to slipping below zero than is a median value of 200k. For instance, in March the economy created only 50,000 jobs.)

There are other factors.

On a positive note, the labor force participation rate could rise, prolonging the time when job growth exceeds labor force growth.

On a negative note, Trump's policies will discourage immigration of all kinds. Tourism has already dropped. Universities are reporting fewer applicants from abroad. This sort of things takes time to show up in numbers but as foreigners are less willing to live in an xenophobic America, we lose twice. Once because those immigrants don't come here to join our workforce and a second time because as they choose to live and work in places like Eindhoven, Netherlands or Vancouver, British Columbia, they create more jobs in those communities rather than ours. An Iranian who works on robotic sensors will help to make a team successful in some other country and all of the jobs that ripple out from that effort - the project managers and administrators within his company or the restaurateur or furniture salesperson outside of his company -  will be in a different country as well.

Pew forecasts 18 million fewer potential workers without immigration. In such a scenario, the number employed would shrink for decades, shrinking the economy with it.

You might easily dismiss this prospect of a sharp decline in immigration as unthinkable. Of course just a year ago, the thought that Republicans would be arguing that we should ally with Russia rather than NATO would have been unthinkable, as would have cuts of 21% to National Health Institute (NIH) or slashing Medicare by half. Trump is disruptive and prides himself on that. It would be silly to bet on him reversing his position on immigration.

Three other huge variables are trade deals, climate change technology, and cuts to science funding. If Trump slaps tariffs onto trading partners and sets off a trade war, our economy will slump. If his policies continue to focus on protecting coal mining jobs that originated in 1740 rather than creating new technologies and jobs in alternative energy, our economy will fail to thrive. If he slashes funding for science and research (like his proposed 21% cut to NIH), he will undermine the creation of new products and technologies that would create jobs in two to twenty years.

Job growth will be less vibrant under Trump. (And to be fair, it would have been with anyone, from Sanders to Clinton to Bush to Trump.) If he gets his way with policy proposals on immigration, trade, and defunding the development of alternative energy and other technologies (new medicines that could have emerged from NIH research, for instance), we will be measuring the net loss of jobs each year, not their creation, tracking a steady decline of 100,000 jobs each month rather than bemoaning a gain of only 200,000 a month as anemic.

A Big Day for Women in Math and Science

On this day, in 1942, movie star Hedy Lamarr patented spread spectrum communications and frequency hopping, a technology that is the basis for modern WiFi and Bluetooth.

Today, exactly 72 years later, Iranian-born Maryam Mirzakhani became the first woman in history to win the Fields Medal - mathematics equivalent to the Nobel Prize. 

So, it only takes a half century or so, but women are eventually getting recognition for achievements in math and science without being talented enough to co-star with of the likes of Clark Gable and Spencer Tracy, Lana Turner and Judy Garland. Or, perhaps, Stanford's Mirzakhani simply hasn't yet taken the time to show that side of her talents.

There is no Bubble in Venture Capital for Tech Firms.

In 2010

• Residential mortgages were $11 trillion, down $700 billion from the previous year.
• Consumer credit was $2.5 trillion, down $200 billion from 2009.
• Venture Capital Financing for technical companies was $17 billion, up $4 billion.

Mortgage financing is 647X as much as what we plow into tech startups. Outstanding consumer credit is 147X as much as the VC community puts into technology startups.

Since the start of the year, Facebook has spent more than $21 billion acquiring startups and Google has spent $4 billion. That's $25 billion in acquisitions for just two of the more prominent names in tech in just the first 5 months of this year. Meanwhile, VCs put only $24 billion into startups all of last year.

My own sense is that the venture capital market is still far from mature, perhaps where consumer credit was in the 1970s when the modern credit card was just emerging. 

There is a question about whether Venture Capital is fueling another bubble, akin to 2000. Based on this data, I don't think so. Not even close. It seems to me - given the importance and potential of new ventures - the ratio of financing for new ventures is - if anything - too low compared to mortgages and consumer credit. In a decade we might find talk of bubble in 2014 comical.

Technology - the Opposite of Romance

From Yahoo:

A hacker attack Thursday shut down the fast-growing messaging service Twitter for hours, while Facebook experienced intermittent access problems.

According to comScore, Twitter had 20.1 million unique visitors in the United States in June, some 34 times the 593,000 a year earlier.

For Twitter users, the outage meant no tweeting about lunch plans, the weather or the fact that Twitter is down.

"I had to Google search Twitter to find out what was going on, when normally my Twitter feed gives me all the breaking news I need," said Alison Koski, a New York public-relations manager. She added she felt "completely lost" without Twitter.

Now that is a rapid move from obscurity to "can't live without it." Technology adoption patterns may be moving in an opposite direction of romance over the course of a life: we are moving from long-term commitments to fleeting, intense relationships with our technology. Of course technology is not left heartbroken when we leave it behind - only the investors in it.

Waiting for Meaning

why do I like this so much?
It seems to explain everything.
- The essence of the message from my brother in law. I don't know what more I could offer by way of commentary or sentiment. It, inexplicably, amuses me. (Is it legal to say that it inexplicably explains so much?)

Advertising : Matchmaker of Ancient and Modern

In advertising we find the marriage of the most advanced and most ancient technologies: desire for status or sex is married to the latest products to emerge from corporate labs and factories. We buy the newest stuff for the oldest of reasons.

The ad, properly done, creates a false association. Gorgeous, svelte women are somehow associated with beer. The rational mind knows that imbibing 200 calories per glass is probably not going to make one more desirable to a woman who so obviously values fitness. But something has already happened in the process of watching TV. Fictional shows put the snap into the trap of ads.

Science fiction and fantasy in particular - but really any fiction - depends on a suspension of disbelief. Once we've sat before the TV we've already laid aside our capacity for critical thinking. We are ready to believe. So, when the ad comes on, although no one explicitly says that beer will make gorgeous women want you, the implication is enough. We buy the pitch and then buy the product. (And of course, those of us who are superior know that it is not beer that works like this. We know it is actually the whitening toothpaste or luxury car that will make her want us.)

The Internet, as much as biotechnology, represents a current apotheosis of technology. So many amazing advances come together to enable us to watch a dog on a skateboard. And it is a running joke with real substance that the Internet is funded by porn. My work email address spam does not work when I log on remotely and it amazes me how many writers of emails are offering to make my penis longer (an offer that seems odd coming from a total stranger). Advanced technology is funded by stimulating ancient impulses.

Modern technology is really just a sophisticated repression of base impulses. People who cut advertising costs during a recession naively believe that the ads get financed by the companies who produce new technology and products. In actuality, the companies able to sell this new technology are financed by the magic of ads: ads that give repressed desires a acceptable outlet.

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Of course, one of the problem with reading blogs is one never knows whether the author is merely speculating out loud or really means what he or she has written. Of course, until the comments come in, even the blogger is uncertain.

I'll Take the de-scrambled eggs - Separating Self and Society

It is a wonderful thing that we’re unable to predict. If we could, it would suggest a lack of control over events, a lack of autonomy for the human race. Prediction suggests determinism; unpredictability suggests freedom.

I’ve previously made the distinction between social and technological innovation. The more I try to make this distinction operational, the more it seems to me that dissecting the two is like trying to put a wedge between heads and tails.

A car is clearly a technological innovation. It has moving parts and relies on inventions as diverse as rubber tires and steel ball bearings.

Of course, a car is also clearly a social innovation. It changes the range a person can travel in a day and greatly multiplies the number of people who can be grouped daily to work on tasks like building cars. It creates a huge separation between work and home.

Any successful social innovation introduces some new technology – even if it is as silly as the dance moves in the Macarena. Any successful technological innovation moves with or drives social innovation. If 150 million people had not agreed to turn over their network of friends to Facebook, the software (the technological innovation) would have been a curiosity. If people never dared to climb into a car (social innovation), the horseless carriage would have been an historical footnote of less importance than any given outbreak of influenza.

Progress depends on the play between these two. An innovation has to enable people to do something – has to have a technological component. To matter, it has to change behavior – has to have a social component.

One of the things that I don’t know about this is how the dance works. Is technology gradually changing to allow us to express our true selves? Or is humanity - human nature itself - changing, led in new and unpredictable directions by technology? And even if it is true that the technology and humanity are now co-evolving, which is the lead in this strange dance? Does this question even make sense in a world where we’re now engaged in genetic engineering?

Has the question of human nature always been bound up in questions of culture and technology? Or are those merely manifestations of human nature? Are technology and society as intrinsic to being human as fingernails and sleep cycles?

Is it not just that it is not possible to drive a distinction between social and technological progress. Perhaps it is not even possible to drive a wedge between self and society.

Just wondering.

Disequilibrium Economics

One of the problems with economics is that it assumes economies gravitate towards equilibrium. In this model, economies are all about moving towards a resting point, a balance between supply and demand, a quiescent state that suggests that the status quo is normal.

Yesterday would have been Thorstein Veblen's 150th birthday. (Curiously, had he actually been alive, that would have made him the world's oldest living economist.) Veblen is probably best known for coining the phrase "conspicuous consumption." Referencing the potlatch ceremonies in which Indians gave away or even destroyed surplus goods to gain status, Veblen explained the robber barons who might light a cigar with a $100 bill.

But to me, a more interesting dimension of his economics was his adoption of Darwin's (at the time) novel idea of evolution as a model upon which to base economic analysis. He emphasized two things that most economists of his time ignored, two things that have proven to be of vital importance to progress (as opposed to equilibrium): technology and institutions.

We all realize how disruptive and defining technology has been to economic growth in century since Veblen began publishing. We still tend to overlook the importance of institutional change. Veblen saw institutional change as essential to economic progress, and reminded us that institutions can be thought of as habits of thought. Changing habits of thought is often harder than changing technology.

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Thanks to the Bob Edwards show and Edwards' interview of economist Ken McCormick for alerting me to Veblen's birthday yesterday and for the refresher on his influence. If you'd like to learn more, one great place to start is with Heilbroner's Worldly Philosophers, which includes a chapter on Veblen (whose penchant for fellow professors' wives did little to help him overcome resistance to his novel ideas).

Lessons from Nature

I've written frequently in this blog about the importance of what I'd call "soft technology." That is, the changes in social institutions, behaviors, and norms that define the shift from one period to another. It seems to me that the emphasis placed on hard technology like engines and computer chips is disproportionate to that placed on transforming society.

But the two actually move together. The steam engine and railroad play along with the creation of capital markets and national governments. The internet fuels non-governmental agencies that coalesce out of shared interests rather than shared geography. Here is a reminder that hard technology is an integral part of any transformation in society.

Janine Benyus, in this video from TED, makes the point that from nature we have 3.8 million years of design experience to draw from. Life creates the conditions for life, a lesson not just in habitat preservation but habitat creation from which we could learn. Enjoy.