New Job Multiplication

It is generally accepted by economists that for every new job, some additional jobs are a natural consequence.  However, not all new jobs are created equal.

The oil industry has been advertising that every new energy job creates two more positions in the economy.

Volvo Car Group’s new factory near Charleston SC, may do much better.  Frank Hefner, an economics professor at College of Charleston, has estimated that the expected initial 2,000 new Volvo jobs would yield more than 8,000 in total for the region.

This should not be surprising.  Auto assembly jobs pay well and add demand for meals, medical care, housing and home related products and services.  Professor Hefner noted that a 10,000 home subdivision is being constructed near the Volvo factory.

A popular mantra for home buyers is; location, location, location.  For the economy, a similar mantra might be; jobs, jobs, jobs.  Investors would be well advised to continue to closely monitor economic data relating to job creation and work force participation as indicators of possible economic and stock market progress.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®