By now, you've had a few days to digest the "wonderful" jobs numbers reported from Washington last Friday.
Well, don't get too excited about the economy. We've been conned again.
First off, 59% of all jobs created this year are in 3 sectors: Leisure/Hospitality, Retail Trade and Administrative/Waste Services. Wages in those sectors have fallen by 0.7%. These jobs pay an average of $15.80 per hour versus the $23.98 average hourly wage. Which means "jobs creation" just equals cheaper labor.
The American jobs participation rate is at 34-year lows and falling, as people give up and leave the workforce.
Underemployment is between 14% and 15% and rising.
America still suffers from 2 million fewer jobs today than it did when the financial crisis started.
But perhaps worst of all is what I call the "part time-fication of America. And this is key to understand if you want to navigate the new American economy (and do well for yourself).
Thanks to years of punitive hiring regulations, taxes and Obamacare, American companies are going "part time." Meaning, Americans themselves are living on less and less.
USA Today, for instance, reports that the "ranks of part-timers have swelled to 791,000 people versus 187,000" since March. In other words, for every full-time job created over the past 6 months, there have been 4.22 part time jobs created.
Since the beginning of the year the data is even more graphic. According to Keith Hall of George Mason University's Mercatus Center, 97% of the net job creation has been part-time employment.
Despite the fact that denial is pandemic in Washington, ObamaCare is driving this in a dramatic demonstration of the Law of Unintended Consequences. Congress voted it in against the wishes of the vast majority of American people and is only just now - to paraphrase Nancy Pelosi - figuring out what's really in it.
Naturally companies are figuring this out first with the net result that millions of workers are being told they have to go part time (or else), because most companies don't want the healthcare costs dropped on them when they're barely able to survive as it is.
Here's the thing...even this isn't the whole story - in order to get to the meat of the problem facing our country now you have to go back about 50 years and look at the top companies then versus the top companies now.
The top dogs then were companies like U.S. Steel, GM, Goodyear and Standard Oil. Now they're companies like Wal-Mart, Google, Apple, McDonalds and UPS.
Can you spot the shift?
Make vs. Made Culture
In the 1950s, our country made stuff that the rest of the world needed. People had to come to us because they couldn't live without what we manufactured. Estimates suggest that as much as 70% of the world's economic activity was tied to companies within our borders.
Now it's the reverse. And the companies at the top of the list reflect this. Nobody actually needs these companies; what we need is inexpensive stuff that we can consume and throw away for which there is very little lasting economic value.
But these companies need international markets where, as I have long highlighted, the real growth is taking place. Today 80% or more of the world's daily economic activity is created outside our borders. Our companies have to go to there to grow.
So now what?
As negative as I am on Washington and as dubious as I am about anything remotely resembling success that they'll create, I believe in America. We have millions of resourceful people who will knuckle down, help each other and find a way through this (even if Congress can't find its way out of a wet paper bag.)
This speaks to a two-part investment strategy.
First, investors who want to grow their wealth have to follow the money. We've been doing that for years here at Money Morning and in our sister publication, the Money Map Report.
We've tapped into the best "glocal" companies we can find because those are the ones with fortress like balance sheets, experienced management and globally recognized brands backed up with highly localized product offerings. Many pay above average income, too, which is always a great thing.
Since this crisis began, we've been market bulls even as we've been economic bears because history shows that this is the most prudent and profitable way to go. And we've invested accordingly.
Case in point, the U.S. economy has grown by $1.3 trillion since the markets bottomed out in March, 2009 but the stock market has grown by more than $12 trillion according to Bank of America Merrill Lynch and Bloomberg data.
Second, you have to give up the illusion that manufacturing is ever coming back our way. The genie is out of the bottle and, with very few exceptions, it's a knowledge game now.
That speaks to the need to invest in what I call "global challengers." For lack of a better term, these are "next-generation glocals" capable of jump starting America and creating millions of new jobs within the next ten years...not to mention billions of dollars for savvy investors.
I break these companies into five key areas - all of which will enhance our nation's role in the world rather than let it continue to falter. You'll note that they are not one shot wonders either. As I see things, success will go to those investors who latch on to sustainable, mutually reinforcing trends with above average spending, policy interest and potential:
- Energy and resources - contrary to common belief, energy demand is not slowing. Gaps in conservation in the primary economies are being overcome in secondary and tertiary markets that have never known cheap energy. Production has grown more than 50% a year in the United States since 2007 according to McKinsey & Co. Overseas the picture is similar.
- Big data - people look at the Internet as a source of data not realizing that the real prize is the data itself. We are on the cusp of living in an age of trillions of sensors that will allow us to identify, analyze and refine relationships we don't even know exist...yet.
- High value production (meaning knowledge based implementation rather than traditional manufacturing) - The days of "send us your ore and we'll send you steel" are long gone. America has a key competitive advantage in high value production in everything from medical devices to flight. Harnessing that will create billions of top and bottom line revenues.
- Infrastructure - Lots of people point to the need for a 1930s style infrastructure program that will put millions to work. What they're missing is that infrastructure, like data, is merely an enabler. No question that it's falling down around us, but the real value will be unlocking what modern systems facilitate. And safeguard.
- The Bottom Billion - There are roughly 2 billion people living on less than $2 a day. While this is believed to be a number that's increasing dramatically, in fact, extreme poverty has been declining at a faster rate every day. And, it's down by 90% from 100 years ago. Imagine what happens when the world's poorest join the global community and take that up by even $0.50 per capita - economic priorities will realign as will global consumer spending.
I'll be back in upcoming articles with a more detailed look at each sector and specific recommendations to help you get started with your own "global challengers."