Revolted Colonies

U.S. Politics and Culture

Category: Economy

How Many Sorcerers Need Apprentices?

Job

Future Ex-President Trump has rolled out his jobs plan, and he’s proposing – wait for it – an apprenticeship program. I could squeeze two pages of jokes out of that alone, but I wouldn’t respect myself in the morning. In TV land, Trump’s apprentices were actually untrained and lacked the mentoring of a successful apprenticeship. The candidates were treasure hunters without a map – or a clue. But if it worked on TV, he reckons, it must work for the inspiration for all reality shows – the American Dream.

Apprenticeship was a great innovation for the Middle Ages. Bring back artisanry and the trade guilds – wait, no organized labor – and you’d really have something. Good-paying jobs will require skills that so far robots can’t improve upon. Apprenticeship will help in certain industries but will be a hopeless mismatch in others.

The apprentice program targets the retail, health care and hospitality industries, where reprogramming – pardon, retraining – would work. But, this week, Amazon swallowed up Whole Foods like an anaconda inhales a jaguar. The gist is, the prospect of job growth in the retail sector is not especially rosy. Jeff Bezos will automate checkout, and cashiers will go the way of the carrier pigeon. Retail is among the ripest targets for job attrition.

Aside from his treatment of US allies, women, American media and people of color, Trump does know something about hospitality. At  entry level, those jobs are not well-paid. Besides, assuming mining jobs could be turned into hospitality jobs, people would need to move to the jobs (the need for portability of health care). Apprenticeship can help some step up into middle-management roles and better pay because there are relatively few technical demands.  But not every stripped-out mine can be turned into a golf course and resort. How many convention centers will we need when robots are running the meetings?

Health care is a non-starter.  Beyond entry level, good healthcare jobs require skill and education,  even some college.  And college, well, we’ve had enough of that! A semester or two at Clackamas Community College is one thing, but a four-year program to a Bachelor’s Degree is a different covfefe altogether.  Even in the higher reaches of healthcare, artificial intelligence is expected to take over routine diagnosis and treatment.

There is no fast, cheap way to better jobs. We need new industries. More than ever, job seekers will need education, not on-the job training, to acquire the necessary skills.  People’s needs and entrepreneurial innovation will prompt new industries.  Let’s hope people will be needed to run them. 

Opening Move

Following his inauguration, President Trump signed two executive orders. One of them canceled an upcoming premium cut on borrower’s insurance for FHA mortgages. The premium cut, of 25 basis points, would have lowered borrower’s costs at a time when mortgage rates are rising. For the borrower, the premium cut would have held down overall monthly costs on new loans. For the FHA, however, the cut would’ve reduced the amount of the insurance fund held by the government to cover borrower defaults.

The fund must be at least 2% of the government’s mortgage obligations. The insurance fund right now stands at 2.32%, slightly more than the minimum. By canceling the premium cut that was to take effect next Friday, the administration has made a conservative move to increase reserves against defaults.

For the new homeowner, rising rates will push up the entry cost of home ownership. The homeowner will have less buying power with a higher mortgage rate and no reduction in the insurance premium.

This is not a sexy issue, not the kind of thing that ever would’ve been discussed during the campaign, even if the campaign had been normal. It reflects conservative thinking about government-backed obligations. It may reflect administration thinking about the strength of the housing market and the underlying strength of employment. By canceling the cut on the mortgage insurance premium, Trump has provided the government with a greater cushion against defaults by borrowers. You would expect this move to have a slight dampening impact on new home purchases. On the other hand, if you believe that new home sales were artificially stimulated by keeping costs down, this move would prevent a bubble in housing starts.

Because the insurance rate can be cut later, this move does not figured to be a very big deal. It reflects conservative thinking about government obligations relative to the minimum requirement And the rate environment. If employment figures remain strong and real wages hold or increase, a cut in the insurance premium rate could be warranted in the future. As a lender or a guarantor, there is no reason for the federal government to cut its cushion to the minimum.

A buyer would be wise to put borrow less — buy a less expensive home or put up a higher down payment. That would lower the carrying cost, making the loan less risky from a lender’s point of view.

Hoosier Daddy? Carrier Will Keep Half of Jobs Slated to End

CarrierLater today, P/E Trump and Carrier will announce that 50% of the 2,000 jobs set to be outsourced to Mexico will be retained. There are no details available yet, but there appears to be a defense-budget stick used on United Technologies, the corporate parent, and some Hoosier carrots, delivered by Indiana. VP/E Pence remains the Governor. Kudos to Trump for saving these jobs.  

There are special factors at play here: the defense contract tie-in, Pence’s ties to the state, and the fact that keeping the jobs will mean only $.02 on Carrier’s profits of $6.50, less than half of 1%. In other words, the Carrier “deal” is a one-off. 

The jobs saved are high-paying, with hourly rates in excess of $20.00. Even with high-paying labor costs, Carrier shares are earning $6.50. Carrier is profitable without moving any of the jobs. 

 So why the impetus to move?  Wall Street earnings, competition, the lack of effective collective bargaining.  All but forgotten is the fact that disappearing jobs mean disappearing consumers. But that is beyond the horizon of the next quarterly earnings forecast. No need for this manufacturer to think about it. 

 

 

 

Third Rate Romance

low rent rendevousLow Rent Rendevous

This week, Hillary Clinton’s campaign launched Together for America, formalizing its recruitment of Republicans who are defecting from its nominee. The website so far consists of a list of Republicans and Independents who have officially declared for Clinton. The common fear and loathing of Donald Trump have made for strange bedfellows, but no one is calling this a love match. Hillary has been reviled by the right as much as President Obama and for a longer period of time.

Long-time National Security advisor Brent Scowcroft, Bush 2 Treasury Secretary and former Goldman Sachs Chairman Henry Paulson, Nixon and Reagan EPA administrator William Ruckelshaus, and Bush I National Security Advisor and Intelligence Director John Negroponte are the best-known names on the Leaders list.   They have thrown their support to Hillary Clinton this one time as a vote against Trump.   Her foreign policy approach, although criticized by Republicans, does not scare them the way Trump does.

This Who’s Who is dominated by foreign policy experts, who are appalled by Trump’s unabashed lack of information, experience, temperament or curiosity. Global politics are far too complex to be handled like a hotel acquisition. Clinton is not their domestic dream. Her economic policies will get the typical Republican rebuff.

Clinton’s economic speech delivered this week in Michigan was predictably Middle of the Road. The far-right National Review crowd called it a disaster, and policy wonks correctly called it lacking in specifics.  Left-leaning economists and pols have been quiet with good reason. The plan satisfies some of the main Progressive goals. She has protected her left flank sufficiently. More importantly, she signaled that she would not abandon her economic plan for a short-term marriage of convenience.

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