These are issues that are likely to loom large over the next several months as the new administration settles in and begins to implement its agenda. Jobs are likely to be a recurring theme as the new administration seeks to address the fears of some of its key constituencies. While it is too early to discuss specific portfolio strategies, investors should remain alert and prepare to assess developments in a timely manner.
One example of the focus on jobs is the recent pressure brought to bear on Carrier regarding its plan to close one of its Indiana facilities in favor of moving production to Mexico. The jobs in question are generally considered to be well paying, union jobs. Following the direct intervention of the president elect, the company agreed to keep some of the jobs in Indiana in return for tax abatements. The company also announced a significant capital investment at the facility that is expected to reduce costs (and employment) through automation.
Another example, that highlights the potential extent of the jobs problem, is Amazon’s recent announcement of its new retailing concept, register-less-shopping. Amazon Go will allow customers to swipe their phone on entering, select, and either keep or replace items, and then leave the store while purchases are charged electronically to the shoppers’ Amazon.com accounts.
There are many other examples, but the key issue remains, balancing efforts to improve productivity while providing employment opportunities, which may be difficult.
Currently there appears to be a material mismatch between jobs and skills. A greater focus on training and appropriate education choices may be helpful. However, there is almost certainly going to be some economic pain during the transition period. The switch from a predominantly agrarian society to one dominated by manufacturing did not happen over night.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®