March of the Robots, Deflation for decades

Many economic blogs for years have called for US Dollar inflation.  This has not materialized as a general event.  I have covered this on the blog before.  Credit = Money, and Credit is not expanding like it did into 2007.   High unemployment stagnates wages.   And as I have called for since 2008 natural resources would creep up in cost over time due to global resource competition.  Specifically as India and China grow wealthier, they will consume a larger chunk of the resource pie.

Another deflationary force is Technology.  Every year less people can do more work.  Technology does create new jobs, but typically for higher education at the expense of lower skilled workers.  The wages are higher, but there are net fewer jobs.

I am a techie, I love tech.  I am not suggesting the world follow the Amish.
But I see technology efficiencies now biting into the technology world.  The area of growth for jobs is now also becoming a victim of the success of itself.

Pure capitalists state that if we freed the economy from the shackles of all government intervention, that the market will find optimal balance.     I question if that balance can ever equal full employment again.
People use history to project future events.  The capitalist 1800's and 1900's that yielded the middle class and a booming economy is not the same backdrop we face today.

The Western Baby boomers are aging, the younger generation have endured a decade of stagnant jobs.
And technology marches on.

What I think is happening is a shift in who is employable.   If you look at the industrial revolution, people shifted from agriculture to the urban centers to staff factories.   Those who did not adapt may have had to experience lower wage jobs in the fields relative to the new industry wages.

I think that is what we are starting to see now, the efficiencies of technology reaching deep into the economy to 'raise' the bar.   I have a couple of items for you to consider.

First, there is robotics.  This industrial industry has for the last decade taken a chunk out of the large manufacturing jobs.   Consider this, Apple is moving some manufacturing BACK to the USA from abroad.   Termed reshoring work.  But instead of 1,000s of factory workers, it is expected TOTAL employment, including the receptionist, to be 200.  Why? Automation.

Baxter, a robot targeting SMALL companies to replace 'expensive' workers at 9 bucks an hour is being marketed for a total of 22K per Robot.  In 18 months you can expect this robot to do much more than today, and every 18 months thereafter.  Dare I say the price will also steadily be reduced.
It isn't out of the question in 6 or 8 years that the Robot be under 10K. In a decade every McDonalds will have 2 people and rest robots running the operations.

Combine above trends with IT trends of eliminating IT datacenters and consolidating on the cloud, and we have massive deflationary forces at work.

Now for a quick higher level view of job facts.  Mish posted two images below about the US labor force over the last five years.  Considering the US government is spending 3.4 Trillion of a 15 trillion economy each year, the US is barely treading water.  Dare I say the forces I quote are hard to keep at bay. Simply look at industries hardest hit.  Those that can be automated or outsourced.

What does this amount to?  Well we are in interesting times in the years ahead.   There will be explosive new companies with tremendous growth as new areas continue to unfold.  Society is a bell curve of capability, and the bar for new jobs will continue to be raised.  I expect an ever increasing higher REAL unemployment rate. (if you don't ignore those who give up trying to work)  There will be continued deflationary forces between baby boomers retiring, technology, and overall unemployment.  And I still think natural resource contention as China kick starts their consumer economy along with India.

I do have optimism, to read that post, click here!