Robots Will Soon Take Over Many American Service Jobs

Robots Will Soon Take Over Many American Service Jobs

$MCD

The evolution of economies follow a well-established pattern.

They start out as agricultural economies, they evolve into manufacturing economies.

Next services increasingly begin to dominate.

In the last stage, economies become knowledge-based.

Most EM (emerging market) economies are based on labor-intensive agricultural and manufacturing businesses, but moving toward more services.

Overall, most developed nations in the world are in the 3rd stage, services are outpacing manufacturing.

While the recent batch of weak industrial production indexes for Germany (down 1.1% in September), the US (-0.2), the UK (-0.2), Brazil (-1.3), Taiwan, and Singapore (both little changed after big declines) suggests that a global manufacturing downturn may be underway, the increasingly services-led global economy is not falling into a recession.

Indeed, it seems that services industries are creating enough jobs to boost some of the demand for what factories make, especially automobiles.

Taking a closer look

1. Global perspective. All this is increasingly evident in the JP Morgan Global PMIs for manufacturing (M-PMI) and non-manufacturing (NM-PMI). The available data we have since Y 2010 show that the global NM-PMI has generally exceeded the global M-PMI. The spread between the 2 has widened since early Y 2014. During October, the NM-PMI was 53.7, while the M-PMI was 51.4.
2. Country perspective. These trends are still relatively new and therefore open to debate can be seen in most of the major economies of the world, since they must add up to the totals compiled by JP Morgan. During October, the spread between the NM-PMI and M-PMI in the US was 9.0 ppts, the most since February 2001, and the 4th highest in the history of the series going back to July 1997.
3. In the Eurozone, the 2 were nearly identical from Y 2010 through Y2013; but since then, the region’s NM-PMI has been consistently higher than the M-PMI.
4. In China, the NM-PMI has exceeded the M-PMI every month since the beginning of Y 2010, with an average spread of 4.4ppts. And, over the past 2 years since October 2013, NM-PMIs among emerging market economies have averaged 51.3, while the comparable measure for developed countries has averaged 54.7.

The 3rd-Stage Economies

There is plenty of evidence showing that the major industrial economies, including: the US, the UK, Canada, Australia, Japan, and the Eurozone countries have evolved into “services” economies.

That is easiest to see by comparing employment in the services-producing and goods-producing sectors of these economies. The former has been outpacing the latter for at least 30 years. A similar conclusion can be deduced by comparing real GDP of goods Vs services.

In the US, payroll employment in goods-producing industries accounts for only 14% of total payroll employment, down from 44% during Y 1943. During Q-3, services accounted for $9.9-T of real GDP, while goods accounted for $5.3-T of real GDP.

The transformation of the US economy from service-producing industries to knowledge-producing may increase the problem of structural unemployment for some workers. That is because knowledge workers spend their entire workday trying to figure out how to put people out of work.

The knowledge workers have figured out how to replace factory workers with robots, and robots are starting to displace workers in China’s factories.

In Y 2014, China was the largest market for industrial robot sales, according to the International Federation of Robotics (IFR), and within 2 years there will be more industrial robots in Chinese factories than in either the European Union or the United States.

This is just the beginning,  There are only 30 robots for every 10,000 manufacturing workers in China, compared with 323 per 10,000 in Japan and 437 per 10,000 in South Korea, IFR data show.

Automation is also coming to the services sector.

A San Francisco start-up company Momentum Machines, Inc. has set out to fully automate the production of gourmet-quality hamburgers.

McDonald’s (NYSE:MCD) is well on the way to offering self-serve kiosks at a majority of their stores instead of paying employees to ask, “Do you want fries with that?”

The Robots are entering our daily lives in ways described by the futurists in the 1970’s. Raising the minimum wages in the service sector has the knowledge workers working hard to eliminate those jobs.

Stay tuned…

HeffX-LTN

Paul Ebeling

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