Mish's Global Economic Trend Analysis

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• Obamacare 43% Approval Rating Declared a Victory
• Productivity Dives, Wages Rise; Inflation Theory vs. Practice; Technical Recession?
• First Self-Driving Truck Hits the Road Already, Nevada License AU010

Obamacare 43% Approval Rating Declared a Victory Posted: 06 May 2015 07:51 PM PDT Credit Yahoo!Finance for the inane headline of the day: Employers shrug off Obamacare, robbing Republicans of a campaign issue. Just 18 months ago, a Republican fantasy seemed about to come true. The Affordable Care Act was in the midst of a disastrous rollout plagued by dialup-stye technology snafus. President Obama had sabotaged his own health-reform plan by falsely promising that everybody happy with their health plan could keep it. As frozen computer screens and canceled policies generated a tsunami of bad publicity, it seemed plausible that Obamacare might be such a flop that voters would clamor for its repeal when the next presidential election came around. But Americans are warming to the controversial program. A recent Gallup poll shows a sharp rise in public approval of how the government handles healthcare, from 29% in 2013 to 43% today. By the time the 2016 election arrives, Obamacare bashers may have an even tougher time making the case against the law. Here's why: Obamacare hasn't killed jobs. Republicans repeatedly lambasted Obamacare as a "job killer," but it doesn't seem to be that, either. Since the law fully took effect at the beginning of 2014, employers have created about 3.5 million new jobs, a very strong pace of job growth comparable with the late 1990s. The Gallup job-creation index, meanwhile, recently hit the highest levels since 2008. It's unlikely Obamacare is directly contributing to job growth, but it sure doesen't seem to be harming it. Killing Jobs No Obamacare did not "kill jobs". In fact it created millions of them, albeit in a superficial manner. By classifying full-time employment at 30 hours, corporations reduced hours of employees to 25. Employees that used to work 32 hours were cut to 25 and they then picked up second part-time jobs. Because the BLS does an inadequate job of calculating the double-counting, job growth has been severely overstated. Don't blame the BLS. It's not their fault, because as amazing as it may seem they do not have access to the data they want. Here's the kicker from the above link. There are still plenty of problems with the ACA and with the U.S. healthcare system overall. Costs are still rising faster than inflation, with a growing portion of many families' disposable income going toward healthcare instead of rent, food, education or savings. While the cost of premiums has flattened out, the cost of deductibles, co-pays and other out-of-pocket expenses has soared. The Affordable Care Act remains a misnomer, because healthcare remains far from affordable for many families. Supposedly a 43% approval rating for an "affordable" program that created as many problems as it solved and did nothing to make health care affordable for most, is now a victory and a non-campaign issue. This is what constitutes reporting these days. Or was this really an infomercial for Hillary in disguise? Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Productivity Dives, Wages Rise; Inflation Theory vs. Practice; Technical Recession? Posted: 06 May 2015 11:53 AM PDT Today's BLS release on Productivity and Costs shows a back-to-back decline in productivity accompanied with rising wages. Productivity is up year-over year, but barely, at 0.6%. Nonfarm business sector labor productivity decreased at a 1.9 percent annual rate during the first quarter of 2015, the U.S. Bureau of Labor Statistics reported today, as output declined 0.2 percent and hours worked increased 1.7 percent . The decline in productivity follows a decline of 2.1 percent in the fourth quarter of 2014. From the first quarter of 2014 to the first quarter of 2015, productivity increased 0.6 percent, reflecting increases in output and hours worked of 3.5 percent and 2.9 percent, respectively. Productivity Labor Costs Unit labor costs in the nonfarm business sector increased 5.0 percent in the first quarter of 2015, reflecting a 3.1 percent increase in hourly compensation and a 1.9 percent decline in productivity. Unit labor costs increased 1.1 percent over the last four quarters. Manufacturing Productivity Manufacturing Labor Costs Manufacturing sector productivity decreased 1.1 percent in the first quarter of 2015, as output decreased 1.2 percent and hours worked edged down 0.1 percent. Productivity decreased 2.3 percent in the durable manufacturing sector and was unchanged in the nondurable manufacturing sector. Corporate Profits Employee wages are up but output is down two consecutive quarters. This is a bottom line hit to corporate earnings. Inflation Theory vs. Practice In theory, the Fed will cheer this development because it adds inflation pressures. Companies will have to raise prices to maintain earnings, and that is just what the Fed foolishly wants. But will businesses, especially fast food and retail stores be able to pass on those costs? And if they do, what about sales? In practice, the Fed will be sorely disappointed with this development. Minimum wage hikes coupled with declining productivity will greatly dampen corporate hiring plans. Marginal stores will close, customers will not like higher prices, store expansions will stall, and retail sales will decline. Meanwhile, gas prices are rising while consumer sentiment is sinking (See Fed Cites Weather, "Transitory" Factors in FOMC Statement; No Hat Tricks; What About Consumer Sentiment?) Imports (think crude) subtract from GDP. Blue Chip Optimism vs. GDPNow Technical Recession The Fed FOMC committee as opposed to the Atlanta Fed GDPNow forecast says this weakness is "transitory". I suggest Déjà Vu Weather? No, It's a Recession! I expect we will soon hear terms like "technical recession" coupled with the ever-popular phrase "second half recovery" as few economists believe this is the real deal. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

First Self-Driving Truck Hits the Road Already, Nevada License AU010 Posted: 06 May 2015 09:54 AM PDT Every time I post on autonomous trucks, I get dozens of emails from people telling me that self-driving trucks will not happen for at least 10 more years, if ever. People cite insurance, driving skills, city traffic, changing road patterns, faulty radar, etc. My typical reply is things will likely happen far faster than even I envision. And so here we are, at least a year before I thought possible (but 15 years before some naysayers thought). First Real Road-Legal Autonomous Big Rig TruckYeah reports Freightliner Just Revealed The First Real Road-Legal Autonomous Big Rig. The Freightliner "Inspiration Truck" will be the first autonomous commercial truck to drive on American roads. Nevada Governor Brian Sandoval and Daimler Chairman Wolfgang Bernhard just bolted on its Autonomous Vehicle license plate to prove it's the real deal, and it's already been spotted in action. In a Q&A session going on right now, Bernhard has explained that the Inspiration Truck will still have a driver, but that person's purpose will be solely to monitor the truck's systems and intervene in the event of a malfunction. The truck requires no special hypothetical infrastructure, and it's able to read road signs and traffic signals on its own. Nevada License AU 010 World's First Self-Driving Semi-Truck Hits the Road Wired reports World's First Self-Driving Semi-Truck Hits the Road. "AU 010." License plates are rarely an object of attention, but this one's special—the funky number is the giveaway. That's why Daimler bigwig Wolfgang Bernhard and Nevada governor Brian Sandoval are sharing a stage, mugging for the phalanx of cameras, together holding the metal rectangle that will, in just a minute, be slapped onto the world's first officially recognized self-driving truck. The truck in question is the Freightliner Inspiration, a teched-up version of the Daimler 18-wheeler sold around the world. And according to Daimler, which owns Mercedes-Benz, it will make long-haul road transportation safer, cheaper, and better for the planet. A Newish Kind of Semi The Freightliner Inspiration offers a rather limited version of autonomy: It will take control only on the highway, maintaining a safe distance from other vehicles and staying in its lane. It won't pass slower vehicles on its own. If the truck encounters a situation it can't confidently handle, like heavy snow that covers lane lines, it will alert the human that it's time for him to take over, via beeps and icons in the dashboard. If the driver doesn't respond within about five seconds, the truck will slow down gradually, then stop. The Freightliner is still very much a test vehicle. Daimler's confident it's safe for public roads, and the Nevada DMV agrees. But the automaker needs a few million more test miles on the books, in a wide variety of locales and conditions (snow, rain, extreme temperatures), before it's ready to offer even this very limited autonomous capability to any customers. That'll take a decade. Humans Don't Want These Jobs Another point in favor of giving robots control is the serious and worsening shortage of humans willing to take the wheel. The lack of qualified drivers has created a "capacity crisis," according to an October 2014 report by the American Transportation Research Institute. The American Trucking Associations predicts the industry could be short 240,000 drivers by 2022. (There are roughly three million full-time drivers in the US.) That's partly because long haul trucking is not an especially pleasant job, and because it takes time and money to earn a commercial driver's license. The shortage will get worse, Perry says, thanks to a suite of regulations set to take effect in the next few years. A national database to collect company-performed drug and alcohol tests will make it harder for drivers who get in trouble at one job to land another. Speed limiters could keep trucks to a pokey 64 mph. Mandated electronic reporting of hours driven will make it harder to skirt rest rules and drive longer than allowed. These are all good changes from a safety perspective, but they're not great for profits. Killing the Human Driver The way to handle that growth isn't to convince more people to become long haul truckers. It's to reduce, and eventually eliminate, the role of the human. Let the trucks drive themselves, and you can improve safety, meet increased demand, and save time and fuel. The safety benefits of autonomous features are obvious. The machine doesn't get tired, stressed, angry, or distracted. And because trucks spend the vast majority of their time on the highway, the tech doesn't have to clear the toughest hurdle: handling complex urban environments with pedestrians, cyclists, and the like. If you can prove the vehicles are safer, you could make them bigger, and thus more efficient at transporting all the crap we buy on Amazon. The end game is eliminating the need for human drivers, at least for highway driving. (An autonomous truck could exit the interstate near the end of its journey, park in a designated lot, and wait for a human to come drive it on surface streets to its destination.) Not a Decade Away It should be perfectly obvious to everyone now this will not take a decade before such technology is mainstream. What's tested now will be routine two or three years from now. When I first started writing about this, most thought we would not get to the testing stage until 2020. The Last Mile Please compare my thoughts from October 4, 2013: Never Has Arrived; The Last Mile to the section on "Killing the Human Driver" from Wired. Truck drivers talk about how they can never be replaced because of city traffic, tight spaces, etc., etc. It's the "last mile" problem. One possible solution is automated trucking stations just outside major urban areas, where human drivers take over the "last mile". Recall the "last mile" problem with high speed internet? It's been solved in numerous ways: DSL, Fiber, Cable, Satellite, Wi-Fi. And so it will be with robot-operated trucking. Automated trucking will not be here tomorrow, in the US, but it's coming far sooner than anyone thinks. Not Just a Test Wired says "The Freightliner is still very much a test vehicle. Daimler's confident it's safe for public roads, and the Nevada DMV agrees. But the automaker needs a few million more test miles on the books, in a wide variety of locales and conditions (snow, rain, extreme temperatures), before it's ready to offer even this very limited autonomous capability to any customers. That'll take a decade." No it won't. Daimler says that to ease the fears people have of self-driving trucks. And once the safety record is proven, there will be no need for a backup human driver at all, at least for the highway. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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