“Well, I never heard it before,” said the
Mock Turtle; “but it sounds uncommon nonsense.”
It was an Alice in Wonderland week. European
countries, companies, and entrepreneurs were getting paid to borrow money, and
ordinary Joes with money in some European banks got letters saying the banks
would be charging to hold their money. The
New York Times reported:
“The most profound changes are taking place
in Europe’s bond market which has been turned into something of a charity, at
least for certain borrowers. The latest example came on Wednesday when Germany
issued a five-year bond worth nearly $4 billion with a negative interest rate.
Investors were essentially agreeing to be paid back slightly less money than
they lent.
Bonds issued by Switzerland, the Netherlands,
France, Belgium, Finland, and even fiscally challenged Italy also have negative
yields. Right now, roughly $1.75 trillion in bonds issued by countries in the
eurozone are trading with negative yields which are equivalent to more than a
quarter of the total government bonds…”
At the end of February, many European stock
markets were showing high single-digit to low double-digit gains for the year.
Meanwhile, back in the United States, the
background report that supported Fed Chair Janet Yellen’s semi-annual testimony
before Congress highlighted the effects of the Fed’s EAT ME cake – also known
as quantitative easing – which left its balance sheet at about $4.5 trillion (up
from about $1 trillion in 2008). Barron’s
speculated the effect of an unexpected rise in interest rates could negatively
affect the Fed’s bond holdings with maturities greater than 10-years. “If
long-term rates do rise faster than anyone now anticipates, the Fed may run
into difficulties of navigation that could prove a tad destabilizing to the
economy.”
A manufacturing renaissance in america... really? In the 1950s, manufacturing accounted for 30
percent of America’s gross domestic product (GDP), which is the value of all
goods and services produced in the United States. Today, it comprises about 12 percent
of GDP. That’s a big change and it was accompanied by a big shift in
employment. In its heyday, manufacturing companies employed about 20 million
people in America. Today, that number has fallen to about 12 million.
For decades, companies moved production facilities away from the United States to countries like China which offered lower manufacturing costs. Now, the trend is beginning to reverse. Lower energy prices and rising wages in emerging countries have companies moving manufacturing back to the United States. However, they’re running into a stumbling block – a shortage of skilled labor. A BBC report asked:
“…will Americans really contemplate going back to work on the
factory floor? The companies all worried about a shortage of skilled workers.
So, I went to meet students from the University of Tennessee. They told me they
didn't see their future in manufacturing. Some wanted to finance those plants
while others said that they weren't good enough at mathematics to work in
advanced industries.”
The 2015 Manufacturing Institute and Deloitte
Skills Gap study confirmed the shortage of skilled manufacturing labor here
in the United States and reported little is expected to change during the next
decade. Through 2025, close to 3.5 million manufacturing jobs are likely to open
but just 1.4 million will be filled because there are not enough workers with
the right skill sets. The study found:
·
60 percent of
available skilled production positions
remain open
·
80 percent
of manufacturing companies are willing
to pay more than the going rates to attract skilled workers
·
82 percent
of executives believe the skilled labor shortage will affect their ability to
meet customers’ needs
The Economist was skeptical about a renaissance in U.S.
manufacturing. It reported for the industry to flourish, America needs investment
in research and development, improved schools and colleges, and changes to the
tax system.
Weekly
Focus – Think About It
“Learn from yesterday, live for today, hope for tomorrow.
The important thing is not to stop questioning.”
--Albert Einstein,
Theoretical physicist
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