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Los Angeles | Boston | London | Frankfurt | paris

Los Angeles | Boston | London | Frankfurt | paris. The Great Restructuring: Get Involved or Get Out of the Way. May 2013. “The root of our problems is not that we’re in a Great Recession, or a Great Stagnation, but rather we are in the early throes of a Great Restructuring .”

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Los Angeles | Boston | London | Frankfurt | paris

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  1. Los Angeles | Boston | London | Frankfurt | paris The Great Restructuring: Get Involved or Get Out of the Way May 2013 “The root of our problems is not that we’re in a Great Recession, or a Great Stagnation, but rather we are in the early throes of a Great Restructuring.” – Erik Brynjolfsson and Andrew Mcafee

  2. Contents World Economy: Get Involved US Economy: Move Out of the Way I II

  3. I World Economy: Get Involved

  4. The Astounding Story of World Economic Growth, 1 AD-2008 Percentage of Total World GDP By Time Period Since 1 A.D. Approximately one quarter of all the goods and services produced in recorded history have been produced in the last decade…and the vast majority of economic growth occurred in the 20th century. Sources: Angus Maddison, “Historical Statistics of the World Economy”; Payden Calculations, The Economist, “Quantifying History: Two Thousand Years in One Chart.”

  5. Emerging Economies Drive Recent Gains in Global Economy Emerging Economies Advanced Economies Global GDP $98.0 Trillion (Estimated) $43 Trillion $75 Trillion $23 Trillion $16 Trillion 37% $27 Trillion 63% $16 Trillion 69% $52 Trillion 53% $7 Trillion 31% $36 Trillion 48% $39 Trillion 52% $46 Trillion 47% 1990 2000 2010 2015 Per Capita GDP $1,841/$18,623 $3,136/$27,734 $6,165/$38,112 $8,391/$44,412 Currently, emerging markets (as a share of global GDP) are just surpassing developed markets. EM countries tend to have larger population growth and far more room for investment than DM countries, allowing them to grow at a much faster rate. **All numbers based on Purchasing Power Parity valuation of country GDP Source: International Monetary Fund, World Economic Outlook April 2012

  6. China: Producing “a Sweden” Each Year! If China grew at a 7.6% year-over-year rate in 2013, this would increase their overall GDP in US dollars by close to 600 billion. In other words… China 2013 GDP Sweden 2011 GDP China 2011 GDP + = • If China grows at a “low” rate of 7.6% per year in 2013, it will still add the equivalent of Sweden GDP in 2011! • As an economy gets bigger, growing at a +8.0% rate becomes infeasible, especially considering global economic headwinds. Source: International Monetary Fund **Based on GDP calculations in USD

  7. For Now, Advanced Economies Lead EM Economies in Per Capita GDP Advanced Economies Emerging Economies Per Capita GDP 1990 2000 2010 2015 $44,412 $38,112 $27,734 $18,623 $8,391 $6,165 $3,136 $1,841

  8. If Japan Is An Example, Plenty of Upside to the China “Story” Japan 1960 1965 1970 1975 1980 1985 China 1995 2000 2005 2010 2015 2020

  9. Does Chinese Growth Threaten? Booming US Exports Suggest No. Growth in US Exports to Top 10 Markets, 2000-11 Source: US Department of Commerce • Since the recession officially ended exports have accounted for about half of the nation’s economic growth. Exports account for 14% of GDP, and,, continue to trend upwards • For some economists, the US is well positioned to continue to capture market share in emerging economies: Tyler Cowen writes, “the leading categories of American exports today—civilian aircraft, semiconductors, cars, pharmaceuticals, machinery, entertainment…—are going to be in the sweet spot of growing demand in what we now call the developing world.” (American Interest, May/June 2012)

  10. From Now Until 2018, GDP Growth in Emerging Regions Will Outpace Growth in Advanced Regions Source: IMF *MENAAP: Middle East, N. Africa, Afghanistan, and Pakistan

  11. II US Economy: Move Out of the Way

  12. Even With Unemployment Rate Falling, Those Unemployed Have Been Unemployed for a Long Time Unprecedented in post-war era 40.2% The number of long-term unemployed has nearly tripled during the recession. • Long-term unemployment creates “hysteris” • If allowed to persist, impacts structure of economy through potential output

  13. And Lots of Workers Still At Work Part-Time for “Economic Reasons”

  14. Something We Can All Agree On? In the US, Not Much of A Recovery…Yet

  15. Labor Force Participation Has Shown No Signs of Recovery

  16. Digging Into the Labor Market Data: Lack of Hiring Accounts for Current Joblessness Gross job losses each quarter Gross job gains each quarter Source: BLS Updated through Q2 2010

  17. Good News: Layoffs Near Record Lows, “Quits” Are On the Rise

  18. Restructuring Underway: Services Employment Rebounds as Goods Producing and State/Local Declines

  19. Restructuring Underway: Services Employment Rebounds as State/Local Declines

  20. The US Still Leads the World In Manufactured Goods Output U.S. China Japan Germany UK Source: United Nations

  21. Long-Term Structural Trend Toward Services, Away From “Stuff”

  22. The “Roomba Effect” Who needs a human when you have me?

  23. The Burgeoning Robot Population

  24. Five Years of Labor Data Tell Us: A Great Restructuring Is Underway Source: Labor Department Structural misalignments in the US labor market appear in the sector-by-sector breakdown. Construction and manufacturing led the job declines—and both sectors have yet to recover. However, on net, some sectors like education/health care and professional services have, on net, added to payrolls over the period.

  25. Evidence of Structural Problems: Skills Mismatch as Employers Face Structural Impediments to Hiring Kauffman Foundation poll of entrepreneurs, Sept. 2011 • Others • Taxes 4% • Regulatory Uncertainty 3% • Ability to penetrate global markets 3% Finding qualified people Managing Fast Growth Accessing Capital Sluggish Economy Source: BLS; Kauffman Foundation

  26. Answer to Employment Problem: New Business Formation Drives Employment! Net job creation, 1985-2005 25.3% of the 28,776 engineering and technology companies founded from 1995 to 2005 had an immigrant key founder. These 7,283 companies produced more than $52 billion dollars in 2005 sales and in 2005 had just under 450,000 employees. Innovative, creative start-up firms are net job creators, not Fed QE Large firms Young Firms Small firms Older Firms Source: Business Formation and Dynamics By Business Age

  27. Start-ups and Innovation in Action

  28. Whatever the Future Brings, It Might Not Be Part of the Routine Unemployment Rate By Job Type Non Routine: Management, Art, Business Legal, Computer, Science, Architecture, Education, Health, Social, Protection, Building and Grounds, and Personal Food Preparation Routine: Sales, Office and Administrative, Construction, Maintenance, Production, Transportation Source: New York Federal Reserve

  29. The US Labor Market Is Improving: Job Gains Continue in Q2 2013

  30. The Composition of World GDP Is Changing 1998 1991 Over 26 Years…. Europe Cedes Ground from 22% of World GDP to 11% China Grows from 4% to 19% of World GDP Rest of World Increases Share of World GDP from 40% to 47% 2008 2018 Rest of world includes all countries other than US, euro area, China and Japan Gross domestic product based on purchasing-power-parity (PPP) valuation of country GDP.” Source: IMF

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