Before wondering how come, despite some fairly inconclusive numbers in Friday’s US December payrolls report, the Dow got as high as 19,999.63 in Friday’s trading, and in light of the Detroit Motor Show opening today, maybe we should reflect on the fact that it was a mere 10 years ago today that the late Steve Jobs revealed the iPhone.
It looked fancy but mobile phones were the domain of Nokia, Motorola and Blackberry. What, we wondered, was the maker of the Mac and the iPod doing fooling around in the phone space? Today one-third of the world’s adults own a smartphone and the iPhone is, for better or worse and despite all the assurances of Android, still the standard setter.
Fast forward 10 years, then cast your mind back 10 years and try to remember how it once was. The Detroit Motor Show might not be able to compete in drama with a Steve Jobs stage show but we might, in a further 10 years’ time, be looking back and wondering how automotive technology has leapt forwards with such ease. Without wanting to get too philosophical, whereas the Las Vegas Consumer Electronics Show – I remember when that was all about TVs and hifi systems – is about playing around with the future, Detroit’s big challenge is to redirect the past. In technological terms, there is little that has undergone so little revolutionary development as the internal combustion engine. In broad terms, Gottlieb Daimler and Carl Benz would still recognise the power unit in a Lamborghini Aventador but Alexander Graham Bell would be totally nonplussed by an iPhone 7.
Although well known for my dedication to and love of big engine gas guzzlers I will be looking to Detroit not just for an indication of what lies ahead but for a hint as to how fast we can expect the new technology to take root. At this point I suspect you don’t know what I’m getting at but please bear with me.
Economic growth – and I don’t just mean that of the organic variety, which is driven by higher levels of productivity – has always been driven by cycles of change. There was the introduction of the motorcar to the mass market, then it was washing machines, then televisions, then dishwashers, microwaves, desk-top computers, laptops, mobile phones, tablets and then there followed a gap. For a number of years I been wondering what the next leap in technology would be that would drive a wave of production and consumption. The internet of things is, in my humble opinion, not it. A fundamental and lasting reconfiguration and recalibration of the automotive world is.
Some might argue that new, clean technology, no matter how fundamental, drives the replacement of the internal combustion engine by electric motors but not supplementary growth, and that where jobs are gained, others will be lost. I disagree. Instead of getting hung up on worrying about the safety of self-driving Teslas in California, we should think of the potential for electric vehicles in sub-Saharan Africa where solar energy is begging to be harvested.
I could go on but won’t. What I will suggest though is that Las Vegas is about vanity while Detroit is about sanity. Look through the latest Ford pick-up or even the announcement that Fiat-Chrysler has fallen at the first Trump hurdle and has announced a new manufacturing plant within the US and ask yourself whether January 9 2017 might not be the new January 9 2007 and whether the next significant wave of global growth might not possibly be coming in the automotive space. Tesla was only founded in July 2003, three and a half years before Jobs gave us the iPhone.
Back to fundamentals. The headline nonfarm payroll number for December at 156,000, released on Friday, missed consensus as opposed to analysts’ forecasts of 175,000. That, however, was offset by a strong upward revision of the November number to 204,000 from 178,000. Thus, the two-month net revision ends up 19,000 higher. The NFP was white noise compared to the hourly earnings figure, which reported for December at +0.4% leaving annualised earnings growth at 2.9%. If economists were worried about price-push inflation without demand-side driven inflation, they can now relax and the Fed can focus on the when rather than if to normalise the interest rate structure.
I opened last week by suggesting that anybody who is not a natural user of the British pound steer clear of the currency. This weekend has brought the prime minister out of the shadows having been accused of “muddled thinking” on Brexit. The message was pretty clear. If the rest of the EU is going to remain unwilling to look for a compromise on single market access with control on free movement, then a hard Brexit will be the only way forward. Although the key focus on what the UK is set to give up, the EU is about to lose 10% of its income. Ukraine, which makes Greece look rich and productive, is knocking on the door, begging bowl in hand, while Britain is exiting clutching its wallet. When will the likes of Jean-Claude Juncker, the muppet-in-chief, grasp that the model is stretched to breaking point.
I had been hoping for more up-to-date figures but please take the time to look at the Danish National Bank’s table of net contributors and net recipients to and from the EU budget in order to gain a rough idea of who gives and who takes on http://english.eu.dk/en/faq/faq/net_contribution. This only covers the period to the end of 2014 but in general terms it should map out some of the issues, not least of all that Luxembourg, the country with the highest per capita income in the union was a net recipient of funds.
So hard Brexit it will be. The BBC had the journalist Henry Bonsu on the news this morning for the review of the papers. On the subject he repeated the nonsense that the UK was about to lose 44% of its export markets. I might be wrong but are China, the US, Australia, Korea, Brazil and the entire rest of the 167 countries in the world which are not members of the EU not able to sell goods to the 28 nations which are? Will this island nation sink into the sea on the day 28 become 27 and 167 become 168? I might be missing the point but I think not. Nevertheless, still no reason to rush to buy sterling.
Major tube strike in London today. I understand that tube drivers now earn more than even experienced doctors and twice as much as teachers. Now that is what I call pricing power. Were trades unions not supposed to be dedicated to the advancement of social justice?
For those who have made it to work, have a good week.