WCA March 2015

From the Americas

The USA economy Strengthening on almost all counts, the national economy feels drag from a new and unexpected source: student debt “These factors – lowered expectations of future earnings and more limited access to credit – may have broad implications for the on-going recovery of the housing and vehicle markets, and of US consumer spending more generally. “While highly skilled young workers have traditionally provided a vital influx of new, affluent consumers to US housing and auto markets, unprecedented student debt may dampen their influence in today’s marketplace.” This was the stark conclusion of the Liberty Street Economics blog accompanying the latest report on US household debt from the Federal Reserve Bank of New York, which noted that the outstanding student loan balance totalled $966 billion at the end of 2012. Student debt now exceeds aggregate auto loan, credit card, and home-equity debt balances – making it the second-largest item of debt carried by American households, after mortgages. Liberty Street acknowledged valid reasons for the popularity of student loans, given the rising costs of higher education and the economic benefits of a college degree. But it would seem that taking on extensive debt early in life is not without its consequences – to the individual borrower and for the recovering USA economy. The New York Fed data presents a rapidly changing picture of the traditionally acquisition-minded young borrower. Until just before the 2008 financial crisis, around 30 per cent of 27 to 30-year-olds in the USA had mortgage debt. Some 33 per cent of people in that age bracket also had student loan debt. Since then the proportion of 27 to 30-year-olds with mortgages has plummeted to around 22 per cent. But, and most significantly, the proportion of adults in that age bracket who have a mortgage has fallen most sharply among those who have student loans as well. While in the past this demographic tended to be more likely to have mortgages, they now have mortgages at a lower rate than those with no student debt. So it is with auto loans. In 2008, 37.6 per cent of 25-year-olds with a student loan also had an auto loan. By 2013 that had fallen to 31.4 per cent.  Is student loan debt standing in the way of a stronger recovery? Certainly it is curbing the eagerness of young adults to buy cars and houses – the big-ticket items that propel a national economy heavily dependent on consumer spending.

Employment Even as American workers lose their edge the computers are sharpening their skill sets “Although fears that technology will displace jobs are at least as old as the Luddites, there are signs that this time may really be different.” A sign noted by New York Times technology reporter Claire Cain Miller is that – even in an improving economy – the percentage of American adults who are working is substantially lower than it was a decade ago, and lower than at any point in the 1990s. In the same 15-year period over which digital technology has inserted itself into nearly every aspect of life, the US job market has fallen into “a long malaise.” As evidence that many workers feel threatened by technology, Ms Miller cited a recent New York Times/CBS News/Kaiser Family Foundation poll of Americans between the ages of 25 and 54 who were not working. Some 37 per cent of those who said they wanted to work gave technology as a reason they did not have jobs. Even more – 46 per cent – mentioned “lack of education or skills necessary” for the jobs available. (“As Robots Grow Smarter, American Workers Struggle to Keep Up,” 15 th December) That perception is not misplaced. Ms Miller traced the two trends responsible for the discouragement prevalent throughout America’s shadow work force. Artificial intelligence has become vastly more sophisticated in a short time, with machines not just following programmed instructions but now able to learn and to respond to human language and movement. At the same time, American workers have gained skills at a slower rate than in the past – and at a slower rate than in many other countries. According to the Paris-based Organisation for Economic Cooperation and Development (OECD), Americans between the ages of 55 and 64 are among the most skilled workers in the world. But younger Americans are closer to average among the residents of advanced countries, and below average by some measures. IBM’s Watson: still learning Economists consulted by the Times cover the range from worried to philosophical in their analysis of a worker’s prospects in this age of rapidly advancing technology. Lawrence H Summers, a former Treasury secretary, said he no longer believes that automation will always create new jobs. Erik Brynjolfsson, of the Massachusetts Institute of Technology, asserted: “This is the biggest challenge of our society for the next decade.” Watson, the computer system built by IBM that bested humans on the American television game show Jeopardy! in 2011, might be said to be rising to the challenge.

BigStockPhoto.com Photographer: Aispl

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Wire & Cable ASIA – March/April 2015

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