The US Economy Leads the World

https://www.nrel.gov/computational-science/artificial-intelligence.html

The US economy became the largest in the world in 1890. It still leads the world today 134 years later.

https://en.wikipedia.org/wiki/Economy_of_the_United_States#:~:text=Many%20workers%20shared%20the%20success,of%20GDP%20since%20around%201890.

Of 10 largest economies in the world, the US has the 3rd highest GDP growth rate at 3.0%. Less developed China (5%) and India (8%) lead the way. The median growth rate is 1.2%. The UK and Germany have negative annual growth rates (recession)! The US has the second lowest unemployment rate at 3.8%, only bettered by Japan at 2.6%. The median is between China at 5.2% and Canada at 6.1%. France and Italy record 7.5% while Brazil and India trail at 8%.

https://www.economist.com/economic-and-financial-indicators/2024/05/02/economic-data-commodities-and-markets

The US economy is as large as China, Germany and Japan combined or as large as the 3rd through 10th largest economies combined.

https://www.usnews.com/news/best-countries/articles/the-top-10-economies-in-the-world

The US dollar is worth 10% more than before the pandemic, reflecting its above average recovery.

https://www.goldmansachs.com/intelligence/pages/how-to-diversify-as-stock-markets-concentrated.html#:~:text=The%20US%20stock%20market%20has,with%20about%2030%25%20in%202009.

The US stock market has overperformed for 15 years, growing from 30% to 45% of global stock market value.

https://www.goldmansachs.com/intelligence/pages/how-to-diversify-as-stock-markets-concentrated.html#:~:text=The%20US%20stock%20market%20has,with%20about%2030%25%20in%202009.

Despite its high wages, high standard of living and highly valued currency, real dollar US exports exceed the pre-pandemic level.

Real dollar imports have returned to their growth trend level, allowing US consumers to take advantage of the differentiated global economy’s strengths.

https://www.axios.com/2023/12/21/misery-index-economy

The misery index, the sum of the inflation and unemployment rates, is down to 7% and trending lower, materially below the 8% average of this century.

US inflation reached 8-9% in 2022 and has fallen to 3%. The “stickiness” is half caused by the lag in housing and rental prices in the index and half due to the continued high 6% federal government budget deficit as a percent of GDP.

https://bipartisanpolicy.org/report/deficit-tracker/

There is nominal inflation or actual deflation in most sectors of the US economy today!!!!

On average, the US economy has been adding 2 million new jobs per year for 14 years. 28 million jobs. This is an amazing result.

During the same period, 12 million more people have retired.

The unemployment rate is at a 50-year low. When I was studying economics in 1974-78, there was a big debate about 5% becoming the lowest possible “structural” unemployment rate possible without escalating inflation. 1997-2007 established that a 4.5% to 5.0% unemployment rate was possible. We raced back up to 9% during the Great Recession. The 35-year average was 6.5%. We experienced 3 years of sub-4% in 2017-19 as economists claimed that this was simply impossible. Unemployment rates are still below 4%.

The Black unemployment rate has been chopped in half, from 11% to 5.5%.

The demand for labor remains high. Job openings peaked at 7.5 million before the pandemic. Job openings remain 20% higher at 9 million 5 years later.

The core labor force participation rate has rebounded from the pandemic reaching a level last seen in 2008.

10% fewer black men participated in the labor force between 1973 and 2013. Participation is now solidly increasing.

Real wages stagnated from 2000-14. They have increased by 10% since then.

Real GDP per capita continues to grow.

If you’re a homeowner, the recent one-third increase in home values is a windfall. If you’re a prospective buyer, housing is much less affordable.

US stock market values are up 50% in 5 years.

Coincidentally (?), corporate profits are up 50% in 5 years.

New business creation increased after the pandemic surpassing the pre-pandemic level and exceeding the pre-Great Recession level. Start-ups typically account for all job creation and ensure competition in product and service markets.

Overall productivity growth in the last 5 years has been the same as in 1973-1990 and 2007-19. In recent quarters productivity has begun to increase at a higher rate and many commentators believe that AI will drive productivity at a higher rate for the next 20 years.

The US has achieved energy independence, doubling its production of natural gas in 20 years.

https://www.eia.gov/todayinenergy/detail.php?id=61242

Renewable energy accounts for 22% of US energy generation.

US manufacturing employment has increased by 15% since the Great Recession. It is higher than before the pandemic despite the increase in real median wages and the increase in the value of the US dollar.

Net farm income has doubled since before the pandemic.

We have one-third more voluntary retirees in 2024 versus 2014.

Those retirees are receiving significantly higher incomes.

Retirement assets have increased by 50% in the last 10 years.

https://www.census.gov/library/stories/2023/09/income-inequality.html#:~:text=The%20ratio%20of%20the%2090th,a%206.7%25%20decrease%20from%202021.

Income inequality has finally peaked in the last 5 years.

The poverty rate has declined by one-third in the last 10 years.

https://www.economist.com/finance-and-economics/2024/04/16/generation-z-is-unprecedentedly-rich

Each generation earns higher incomes in the productive US economy. My first post college job paid $800 per month, $9,600 per year in 1978.

US citizens pay very low taxes compared with their developed nation peers.

Summary

The US economy recovered from the uncertain pandemic period faster than other countries due to the combination of very loose fiscal and monetary policy. The fiscal policy boost was bipartisan. The monetary policy boost was nonpartisan. As the strength of the US recovery became apparent by the end of 2021, both Congress and the Federal Reserve Board should have reduced their stimulus levels. The FRB adapted slowly and increased rates. Congress and President Biden have not adapted.

The US economy is experiencing an extra year of excess inflation due to these actions.

It is important to look at the long-run trends and many indicators of economic health. Monetary policy in an independent Fed is effective. Fiscal policy is ineffective. Inflation is higher than ideal.

Let’s list the positive economic indicators. GDP growth, US dollar value, stock market value, exports, employment, retirees and incomes, unemployment, job openings, labor force participation, home values, corporate profits, startups, productivity, energy independence, green energy, manufacturing employment, farm incomes, income equality, poverty, generational progress, and tax burden.

The US economy continues to deliver very positive outcomes for our country. President Biden could do better on reducing the federal budget deficit by increasing taxes or reducing expenditures. Overall, his policies have allowed the economy to continue to deliver benefits.

2.0% Inflation: Not in 2024

Last July, I predicted that inflation would be “near 2% by the middle of 2024”. That is not going to happen. Let’s look at the components to assess the last year and the likely future.

Year over year inflation rate peaked at 8.6% in 2nd quarter of 2022. It was more than cut in half at 4.0% a year later in the 2nd quarter of 2023. The last 2 quarters have been 3.25%. The “easy work” is complete. The “hard work” remains.

More volatile Food and Energy prices do not explain the continuing 3%+ inflation rate.

We have enjoyed energy price deflation for 3 quarters.

Food consumed at home prices have been nearly flat for the last 2 quarters after the 12-13% inflation during 2022.

The price of food consumed away from home continues to rise at 4-5% annually. A tight labor market has increased staffing costs for restaurants. High food input costs taught them to better manage their menu prices. Many restaurants went out of business during the pandemic. Restaurants, large and small, lost money during the pandemic and are fighting hard to recover these losses. Following the lean pandemic years consumers have largely returned to their habits of eating out. This is a business sector where high aggregate demand driven by government deficit spending is creating inflation. It is not the “wage-price spiral” of the 1970’s in a manufacturing intensive economy but it is a similar situation in our retail-intensive economy.

We have enjoyed deflation in durable goods prices for 5 quarters as US and global manufacturers realigned their supply chains with more predictable demand patterns.

Nondurable goods inflation has been below the 2% benchmark for 4 quarters.

The broadly defined “services” sector at 5-6% inflation remains a stubborn problem area. It contains a number of sub-sectors with very different market conditions.

Medical care inflation above the overall inflation rate has been an issue for decades, but it has averaged just 1% for the last 5 quarters.

Transportation services prices have increased by 10% annually. This includes public and private transportation. Public sector transportation is attempting to recover from the pandemic driven decline in ridership. Private rail and truck carriers were disrupted by the pandemic as goods movements plummeted. The prospect of driverless trucks kept freight firms and drivers from returning. Transportation drivers are on the low end of wages. The overall increase in real wages at the low end of the labor market has made these physically demanding, away from home, jobs less attractive. This inflation is part long-term structural adjustment and part short-term recovery of freight flows in the economy. Transportation services is 5% of the CPI, material, but not large enough to drive the total.

The education and communications pair of service sectors has low inflation. Education is higher. Communications is lower.

Housing is one-third of the total CPI. It is a very technical, wonky area. It combines a blend of actual rental charges and the estimated rental value of owned homes. Increases in home prices are smoothed out and their impact on the CPI tends to lag by 2-8 quarters. Housing inflation has fallen from 8% to 5%.

Housing sales prices have declined for 4 quarters. This will increasingly blend into the housing CPI, soon producing deflation rather than 4-5% inflation.

https://www.nerdwallet.com/article/finance/rental-market-trends

Market rent inflation remains in the 3-3.5% range based on the cumulative lack of US housing construction since the Great Recession of 2007-9. Combined with falling housing sales prices the combined housing CPI should decline to 2% by the fourth quarter of 2024.

Dreaded “cost-push” inflation is not a major factor for the US economy. A tight labor market has delivered 1% annual real wage increases for the last 5 quarters. This is a factor in inflation but not a driver or barrier to reaching 2% overall.

https://bipartisanpolicy.org/report/deficit-tracker

2024 looks like 2023, a very high budget deficit for a full-employment economy. In classical Keynesian economic terms, the aggregate demand pressure indicates continued 3% inflation.

An overheated economy typically shows a strong increase in imports as demand reaches out globally. This is not the situation in the US this year.

The money supply has a long-term impact on the economy, prices and inflation. The Federal Reserve Bank has been shrinking the “money supply” by 10% annually.

Commodities are the most volatile element of the global economy. Prices jumped by 20% with the unanticipated quick recovery from the pandemic. The last year has delivered commodities price deflation.

Changes in relative market power can drive inflation. Corporations increased profits by 50% in the first year of the pandemic. Profits have been relatively flat since then.

Summary

A dozen sectors point towards 2% inflation by year end. Energy, food at home, durable goods, nondurable goods, medical care, education/communication, housing prices, real wages, imports, money supply, commodity prices and profits.

Four sectors indicate concerns. Food away from home continues to drive high inflation.

https://www.axios.com/2024/02/13/cpi-food-inflation-dining-out

Public and private transportation services have not yet reached equilibrium. This pressure may continue for another 4 quarters but should not be a long-term inflation driver.

https://www.census.gov/construction/nrc/current/index.html

The “Great Recession” destroyed the construction industry. It has slowly recovered. Total construction has increased, perhaps not enough to bring housing supply into balance with demand 15 years later. Rental inflation at 3% is likely to continue.

The federal budget deficit is the greatest concern. 6% of GDP is a huge deficit.

Net, net, I predict that the Urban Consumer CPI increase in the fourth quarter of 2024 versus the fourth quarter of 2023 will be 2.25%. The federal government spending deficit will directly and indirectly boost inflation.

US Economy Consistently Exceeds Expectations (Index)

https://www.artnews.com/art-news/news/wall-street-bull-sculptor-arturo-di-modica-dies-digital-animation-sells-morning-links-1234584300/

Human Progress: Accumulate and Innovate

https://www.cnn.com/2016/03/17/world/gallery/tbt-albert-einstein/index.html

Human progress is based on 4 things, IMHO. We are able to abstract and generalize. We accumulate our lessons learned. We innovate. We combine our structured, accumulated knowledge with innovations. Creativity and innovation get most of the attention. Yet, the accumulation of our practical and theoretical experience in language, books, records and equations may be equally important. The ability to switch “back and forth” between a fixed structure, history, religion and culture and new innovations may be the most important aspect of all. We have divergent and convergent thinking abilities. We use inductive and deductive reasoning. We intuitively prefer “either/or” but can manage “both/and” logic. The modern history of mankind’s progress points towards the importance of creativity and “both/and” logic.

Abstraction is a relatively recent phenomenon. Democritus imagined atoms, smaller and smaller particles. Heraclitus imagined all as change. The Greeks imagined earth, water, air, and fire beneath everything. Pythagoras and Euclid provided geometric proofs and ideal figures. Aristotle offered a powerful version of formal logic. Plato defined the “forms” and the ideal realm that stands above our experienced reality. Descartes defined mind versus body and the Cartesian coordinate system. Newton rationalized the universe in terms of algebraically defined laws. Kant defined pure logic and the limits to pure logic. The great appeal of abstract rules and an implicit mechanical universe remains to this day. The “Enlightenment” produced new politics, economics, culture, science and religion based upon these powerful insights.

The accumulation of knowledge has occurred in a surprisingly wide variety of forms. Life in DNA. Sexual reproduction. Man’s biological memory. Human consciousness. Spoken language. Music. Myths. Written language. Culture. Laws. Accounting systems and records. Religious practices. Architecture. Books. Libraries. Scribes. Printing. Histories. Universities. Experimental science. Prophets. Peer-reviewed journals. Scientific societies. Mass media. Recordings. Radio. Video. Internet. Wikipedia. Zoom. 

The history of innovation is well known. I want to highlight the general trend away from simple, atomistic, “either/or”, static views to more complex, multi-level, “both/and”, dynamic, organic views that provide much better insights into our real experience.

Physics has moved from statics to dynamics. Classical mechanics has been replaced by complex, probabilistic quantum mechanics. The fixed, static, deterministic perspective has been replaced by Einstein’s relativity. In general, deterministic views are replaced by probabilistic views. The solid atoms have been replaced by waves and fields. Light exhibits both wave and particle behaviors. Heisenberg says we cannot measure everything. The background framework of an “ether” is no longer required. The mathematics required to describe physics has moved from algebra to multi-variate calculus to string theory. Only a handful of people truly understand the frontiers of physics in the last 100 years. 

Mathematics has advanced wonderfully in the last 500 years. Newton and Leibniz invented the calculus. Man could now measure, describe, imagine and control changes through time. There is an equation underlying all activities that can, in theory, predict the future and explain the past. Dynamics can be described. Three-dimensional Euclidean geometry was superseded by multiple-dimensional geometry, Riemann curved space and fractals. Probability theory was developed to clearly describe apparently random activities, providing a solid basis for evaluating the results of experiments. Set theory evolved to encompass all of mathematics and logic, including various conceptions of infinities. Goedel’s 1931 “incompleteness theorem” undercut Russel’s attempt to define a single, bottoms-up, certain, powerful mathematics.

Biology evolved from collecting, illustrating and categorizing specimens to Lamarck’s deterministic evolution to Darwin’s evolutionary survival of the fittest perspective. Society increasingly adopted a biological, process, systems theory perspective in place of a physics, mechanical, materialistic perspective. Nature versus nurture became nature and nurture. The details of genetics is better understood as a very complex process involving multiple genes and other structures.

In philosophy, Hegel defined his dynamic thesis, antithesis, synthesis model. History now ruled. Eternal universals were much less likely. Multiple perspectives were elevated. Certainty was less likely. Marx tried to use Hegel’s general framework combined with an economic, materialist determinism but he failed.

In practical technology, we have seen the rapid accumulation of knowledge. We have also witnessed the great importance of “both/and” solutions. For example, ships and automobiles required the invention of a clutch that provided both solid propulsion and slippage. Powered vehicles first required rails but were turned loose as motor carriages. Wheels evolved from steel to rubber to accommodate shocks, turns and rough roads. Vehicles added suspension systems. 

In economics, we advanced from mercantilism to comparative advantage and free trade. We left behind land, labor or capital as the only sources of value with the insights of the marginal productivity economists. We moved from static to dynamic perspectives and focused on the determinants of growth in advanced and developing nations. Keynes demonstrated that national economies were more than the sum of individual markets and that self-regulating equilibriums were not inherent in a market system. 

Computer systems have evolved from fully defined linear and logical systems to massively parallel systems capable of artificial intelligence and spoken interaction with humans.

Businesses have replaced assembly lines and Taylor’s experiments with a deeper understanding of individual tasks in probability terms and the sequence of events in any process. Firms have embraced Japanese style process management and improvement, delivering constantly improving results. Supply chains span the globe. Project management is now “agile”. Strategic planning is no longer deterministic, but focused on mission, vision, values, strengths, weaknesses, opportunities, threats and culture. Investments are considered within the framework of portfolios of risks and returns. Entrepreneurs and leaders are valued above technical and professional experts.

For many, religion has evolved from a legal, literal, deterministic perspective to one that emphasizes the principles, insights, opportunities, feelings, experiences and possibilities of a given creed, despite the loss of absolute certainty in a “Secular Age”. 

As humans we prefer a simpler, more deterministic view of the world. Yet the world shows us that it is more complex and that we will never fully understand it. 

Good News: Golden Age for US Jobs Growth (21st Century)

Economists prefer to measure data at business cycle peaks and troughs. After the Millenium Y2K scare, we endured a mini recession. Employment peaked at 132.8 million jobs in March, 2001. Today, in October, 2023, we have 156.9 million jobs, an increase of 24 million jobs in 22 1/2 years, almost 1.1 million new jobs created each year! This is despite the job destroying effects of the Great Recession and the Pandemic.

The longest business expansion in US history ended after 10 years in February, 2020. The pandemic eliminated almost 22 million jobs in 2 months, leaving the economy with just 130.4 million employed, barely above the trough of 129.7 million in February, 2010.

The economy replaced those jobs in just 26 months when the June, 2022 figures were reported! In addition to replacing the first 22 million jobs, the economy has added another 4.5 million jobs in the last 16 months, averaging 280,000 per month or 3.4 million per year! At the same period after the Y2K recession, the economy averaged 2.6 million new jobs per year. At the same period after the Great Recession, the economy averaged 2.8 million new jobs per year. Our economy averages 1 million new jobs per year and can accelerate to 3 million per year when recovering from a recession. The current recovery is stronger than either of the last two.

Another way to gauge progress is to measure jobs added from peak to peak. The economy added 5.6 million net new jobs by December, 2007, or 836K per year. In the 13 years until February, 2020 the economy added 22.7 million jobs, or 1.141M per year. Since then, the economy has added 4.5 million jobs, or 1.240 per year, a very solid result.

Where are the extra 4.5 million jobs? 38 states exceed their pre-Pandemic totals. Texas (1.1M), Florida (750K), California (500K), North Carolina (300K) and Georgia (250K) lead the way. Arizona, Utah, Tennessee, Nevada, South Carolina, Washington, New Jersey and Indiana each added at least 100K, for a total of 4 million by these 13 states. On the downside, New York remains 125K short and Vermont, DC, Hawaii and Rhode Island are more than 2% below February, 2020.

The post-pandemic economy is creating jobs slightly faster than the post-Great Recession economy. 17 states are growing at least 2% faster than their pre-Pandemic trend rate. Idaho, Nevada, Montana, Utah and Florida are growing at least 4% faster than before. 9 states trail their prior growth rates by at least 2%. North Dakota, Hawaii, New York and DC trail their prior growth rates by 4% or more, for various reasons.

During the full 23 years, Texas (4.5M), California (3.3M), Florida (2.7M), New York (1.1M) and North Carolina (1.0M) added the most jobs. Washington, Nevada, Arizona, Utah, Colorado, Tennessee, Georgia and Virginia each added more than one-half million, for a total of 18 million in the 13 leading states. While the nation added 18% more jobs during this period, 9 states grew by 3% or less: Louisiana, Mississippi, Illinois, Michigan, Ohio, West Virginia, Rhode Island, Connecticut and Vermont. These states accounted for more than one in six citizens in 2001, so their weak performances limited the overall economy.

Summary

The economy started the 21st century slowly with a small recession and weak jobs growth during the Bush years. Obama started his first 2 years with a 9 million job deficit before starting a very strong and long 10-year recovery that added 23 million jobs. Economists did not expect the recovery to last during the Trump administration but almost 9 million net jobs were added on his watch before the pandemic. Biden refilled the 22 million lost jobs in 26 months and has added 4.5 million more in the next 16 months. With the Fed’s higher interest rates, job growth is slowing but is generally expected to exceed 1.25 million in 2024. The US economy continues to outperform.

https://www.bls.gov/web/laus/statewide_otm_oty_change.htm

https://www.cbpp.org/research/economy/tracking-the-recovery-from-the-pandemic-recession

https://www.stlouisfed.org/publications/regional-economist/2023/nov/slower-gdp-growth-falling-inflation-us-economic-outlook-2024

https://www.forbes.com/sites/jackkelly/2023/11/18/heres-why-the-job-market-will-improve-in-2024/?sh=eedb8d139ead

https://www.morningstar.com/markets/why-we-expect-job-market-slow-2024

Our Hamilton County: Peer Counties

In 1970, Hamilton County was home to just 55,000 people. It has grown 6-fold since then to more than 330,000. One percent of the nation’s 3,143 counties have experienced similar growth in this 50-year period. These 32 counties combined have grown more than 5-fold from 2.2M (1.1% of US) in 1970 to 11.8M (3.6% of US) in 2020.

8 of the counties are Sunbelt retirement areas. 4 are smaller urban areas. 20 are suburban/exurban counties within larger metropolitan areas.

Each county remains fast growing, issuing an average of 5,000 building permits in 2022 versus an average of 500 per county nationally. Hamilton County’s 5,800 permits is above average.

As a group the counties average 16% of residents aged 65+, ranging from 11% to 25-29% in retirement counties. Hamilton County’s 14% makes it a little younger than the national average of 17%.

The percentage of adults working averages 66% versus 64% for the US as a whole, ranging from 48-54% in retirement communities up to 74%. Hamilton County’s 71% ties for second place.

Median household income at $85,000 for this group is 13% higher than the national average. Hamilton County’s $115,000 is sixth highest. 5 of the retirement counties average less than $70,000. Loudon County records a stunning $170,000.

Poverty rates are the mirror image, at 9% for the group versus 12% nationally. Rates range from 3-16%. Four retirement areas have poverty rates above the national average. Hamilton County’s 4% is tied for second lowest.

The group records 38% of adults with college degrees versus 34% for the nation. 7 retirement counties and Henry County south of Atlanta report 28% or less. Hamilton County’s 61% is second to Loudon County’s 64%.

Average home values are $345,000 for this subset, a solid 22% higher than the $282,000 national average. 10 counties reported prices below the national average, 5 in retirement areas, 4 in suburban counties and Bentonville, AR. 4 suburban counties listed their median home prices above $600K: DC, Sacramento, Nashville and Denver. Hamilton County’s $351,000 was average for the high growth group.

The group averaged 68% non-Hispanic White versus 59% for the nation as a whole. 4 counties had more minorities than non-Hispanic Whites: Ocala, FL, Henry/Atlanta, Prince William/DC and Brazoria/Houston. St. Charles County in the St. Louis Metro area had the highest non-Hispanic White share at 85%. Hamilton County’s 81% was 6th highest.

These 32 counties averaged 10% foreign born, much below the 14% national average. St. Charles County recorded only 3% foreign born. 5 counties reported 20% or higher foreign born: Forsyth/Atlanta, Ocala and Naples, FL, and Loudon and Prince William/DC. Hamilton County’s 9% is a little below the group average.

Summary

Hamilton County is one of 32 counties that have recorded tremendous growth across 50 years. It is relatively young and less diverse than most. It has higher incomes and average housing costs compared with its peers.

Our Hamilton County: Job Growth Is Even Faster than Population Growth

https://www.indystar.com/picture-gallery/news/local/hamilton-county/2023/02/28/inside-republic-airways-new-aviation-campus-carmel/11282362002/

Hamilton County’s employment has grown 16-fold since 1970 from 15,000 to 243,000. This is a 52-year compounded 5.5% growth rate. You aren’t likely to find that growth rate in your stock or mutual fund portfolio!

This growth started from a low base of 1,500 new jobs per year and accelerated to 5,000 new jobs per year by 2000. Hamilton County has maintained this growth rate for 2 decades with some extra results recently!

Hamilton County’s population doubled from 1970 to 1990. Metro Indy, excluding Hamilton County, grew by the same 50,000 people. In the next 30 years, Hamilton County added more than 250,000 people and the rest of metro Indy added a very solid 475,000 people (almost 2X). Hamilton County benefits from the Midwest leading growth of metro Indy.

Hamilton County employment growth has been a little faster than population growth.

Metro US population has grown by 1% annually and employment has grown by 1.6% annually. The Indy metro area has grown at similar rates. Hamilton County has grown 3-4 times faster.

As Hamilton County has grown, its annual growth rate has declined from 7% to 4%, still far above the 1.5-2% baseline growth rate.

Hamilton County has grown from 1/3,000 US people and 1/5,000 US employees to 1/800 citizens and workers. (4-6X growth).

Metro Indianapolis has been a solid job creator. Hamilton County has grown alongside the metro area.

Hamilton County was a “bedroom suburb” in its early days but reached the national level of jobs to population by 1992 and tracked the national average thereafter.

Good News: Metro Indy is a Midwest Jobs Leader, 1990-22

Between 1990 and 2008 US jobs grew by 22% but trailed in Midwest metro areas, increasing by only 14%. US jobs have grown by 9% since the Great Recession, with the Midwest trailing slightly at 8%. Metro Indianapolis has been a percentage growth leader in both periods, at 27% and 18%. Columbus and Kansas City show similar figures. Minneapolis has higher actual jobs added but slightly lower percentage growth on its twice as large base.

Chicago has added more total jobs, but its 18% growth is far behind Indy’s 49% and most of its growth took place back in the 1990’s. Nashville is typically grouped with the Southeastern states but if it was included in the Midwest, it would be the clear winner, nearly doubling its job base in 3 decades.

Personal Value Creation and Capture

http://awakeningcenter.blogspot.com/2017/08/one-word-plastics.html

Join a Growth Industry

This 1967 lesson in “The Graduate” remains relevant today. A rising tide lifts all boats.

Live a Great Life

Establish your priorities for life. What is negotiable or non-negotiable? How much is incremental income, wealth and financial security worth to you and your family?

Invest

The opportunity to own your own firm is greater today than ever before. Entrepreneurship is a high risk/high reward option. It requires a financial investment. Internet partners are ready to provide most support services. Licensing and franchising provide other options. Niche products and services have a global market.

Trade-offs

How many hours? Physical risks? Work the firm’s top priority every minute? Firm risks – seasonality, stability, leverage, industry risk, start-up. Serve as a representative for a group? Grey ethics, whatever it takes? Consultant, gig worker, cross-team, project member.

Profession

Degree(s), time, cost, intern, resident, trainee, junior, dues, investment, licensed, certified, valued, next best option for firms, international outsourcing, AI outsourcing.

Talent

The very best of the best. Creative, sports, intellectual, selling, persuading, appearance, arts, counselling, investing. Ability to leverage business wins. Ability to monetize output broadly.

Managing

Managing the conflicts between people and tasks. Great managers are well compensated for buffering between these contrasting forces. Adequate managers “get by” or are demoted in competitive industries.

Analysis

STEM skills applied are highly valued today. Specialized “analyst” skills. Technocracy. Problem-solving in unstructured situations. Choosing the right tool to structure the situation so that a decision is clear. Analysis applied to large value deals, decisions, contracts and acquisitions. Strategic choices, competitive advantage, sustainable moats, value extraction.

Sales

Customers have choices. They value quality, speed, flexibility, features, price, ease of doing business, risk reduction and personal relationships (QSFVIP). Great salespeople are well compensated for connecting a firm’s value proposition to customers in a sticky fashion. They play the game in 3 dimensions: firm, customer and salesperson. Commissioned sales and agent models. New business acquisition.

Influence/Politics

Communications skills. Relationship skills. Influence skills. Negotiating skills. Political relationships applied – internally and externally.

“Rent” from Specific Skills, Knowledge, or Relations

Industry, firm, profession, language, international, expert, technical, customer, regulator, supplier, or consultant knowledge, understanding, influence. A combination of skills required for a role. Holding a position in the firm.

Responsibility

Raise your hand. Manager. Project manager. Project member. Value added leader for new products, customer markets, structures and processes. Line manager in a measurable success role. Resource manager for broadly defined suppliers, customers or staff resources. Second level or higher management role responsible for results largely beyond your control.

Leadership

A mythical beast. Charisma. IQ. Confidence. Elite education and experience. Progressive successful role. General management ability to lead multiple functions, teams, divisions, geographies, product lines without being an expert. Social status and ease.

Summary

We live in a complex world of many firms, products and services competing for the attention of consumers. Firms employ people to make sales and profits. Firms employ people who they believe provide them with the greatest “marginal product of labor”, the greatest value added. Firms pay as little as they can. Their interest is to employ labor for less than their marginal value added and capture the difference. Set your moral limits. Work on your own. Determine the best path to be a value-added resource. Pick an industry. Pick a profession. Exploit your own extreme talents, sales, influence, specific knowledge, analysis, responsibility or general management abilities. No one has ALL of these skills. You have some talents. Leverage your talents.

I started writing this article thinking about the ratio of incomes of large firm CEOs to shop floor/outsourced workers. It has risen from 20X to 300X to 2,000X through time. Beginning with “essential workers” as the baseline, somewhere between the effective $10/hour minimum wage, and the $20/hour median income, others earn incomes in the US many times above the median. What incremental value do they provide to their firms or to society? in “order of magnitude” terms, I think that hours and flexibility are worth 50%. Professional, management, analysis, sales, influence and specific knowledge add 100% each, or 250% in combination. “Higher level” responsibility and leadership skills add another 200-300% of added value, reaching a combined 500-600% premium above median incomes (IMHO).

Historian Will Durant emphasized the need for all civilizations to incentivize their most talented individuals to engage in the work that coheres and advances their lives. First, political unity, commitment and loyalty. Second, material progress. Our society must be attractive and deeply engage the top 20%, 10%, 5%, and 1%. Does this require a 5X income advantage? 20X? 200X? 2,000X?

We currently live in a “winner takes all” society that is comfortable with 1,000X discrepancies between the winners and the workers. Is this required to incentivize the “best and the brightest” to work hard to provide incremental value for society? I think not. This is a political choice we have accepted since Reagan. Our society is incredibly productive because it is comprised of productive and highly educated individuals. The political choice of how much the most successful people retain is a separate issue.

Our Hamilton County: Low Unemployment

https://www.misoenergy.org/about/

One of the “control centers” at MISO Energy in Hamilton County.

Hamilton County’s unemployment rate has averaged 3.1% since 1990, a little more than one-half of the nation’s 5.8% average. The Indy metro area has averaged 4.6%. In the last decade, Hamilton County has still averaged 2.0% lower than the national average of 5.3%.

https://fred.stlouisfed.org/series/UNRATE#0

https://fred.stlouisfed.org/series/INHAMI5URN#0

https://fred.stlouisfed.org/series/INDI918URN