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Los Angeles | Boston | London | Frankfurt | paris. The Great Restructuring: Get Involved or Get Out of the Way. May 2013. “The root of our problems is not that we’re in a Great Recession, or a Great Stagnation, but rather we are in the early throes of a Great Restructuring .”

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Los angeles boston london frankfurt paris

Los Angeles | Boston | London | Frankfurt | paris

The Great Restructuring: Get Involved or Get Out of the Way

May 2013

“The root of our problems is not that we’re in a Great Recession, or a Great Stagnation, but rather we are in the early throes of a Great Restructuring.”

– Erik Brynjolfsson and Andrew Mcafee


Los angeles boston london frankfurt paris

Contents

World Economy: Get Involved

US Economy: Move Out of the Way

I

II


Los angeles boston london frankfurt paris

I

World Economy: Get Involved


The astounding story of world economic growth 1 ad 2008

The Astounding Story of World Economic Growth, 1 AD-2008

Percentage of Total World GDP By Time Period Since 1 A.D.

Approximately one quarter of all the goods and services produced in recorded history have been produced in the last decade…and the vast majority of economic growth occurred in the 20th century.

Sources: Angus Maddison, “Historical Statistics of the World Economy”; Payden Calculations, The Economist, “Quantifying History: Two Thousand Years in One Chart.”


Emerging economies drive recent gains in global economy

Emerging Economies Drive Recent Gains in Global Economy

Emerging Economies

Advanced Economies

Global GDP

$98.0 Trillion (Estimated)

$43 Trillion

$75 Trillion

$23 Trillion

$16 Trillion

37%

$27 Trillion

63%

$16 Trillion

69%

$52 Trillion

53%

$7 Trillion

31%

$36 Trillion

48%

$39 Trillion

52%

$46 Trillion

47%

1990

2000

2010

2015

Per Capita GDP

$1,841/$18,623

$3,136/$27,734

$6,165/$38,112

$8,391/$44,412

Currently, emerging markets (as a share of global GDP) are just surpassing developed markets. EM countries tend to have larger population growth and far more room for investment than DM countries, allowing them to grow at a much faster rate.

**All numbers based on Purchasing Power Parity valuation of country GDP

Source: International Monetary Fund, World Economic Outlook April 2012


China producing a sweden each year

China: Producing “a Sweden” Each Year!

If China grew at a 7.6% year-over-year rate in 2013, this would increase their overall GDP in US dollars by close to 600 billion. In other words…

China 2013 GDP

Sweden 2011 GDP

China 2011 GDP

+

=

  • If China grows at a “low” rate of 7.6% per year in 2013, it will still add the equivalent of Sweden GDP in 2011!

  • As an economy gets bigger, growing at a +8.0% rate becomes infeasible, especially considering global economic headwinds.

Source: International Monetary Fund

**Based on GDP calculations in USD


For now advanced economies lead em economies in per capita gdp

For Now, Advanced Economies Lead EM Economies in Per Capita GDP

Advanced Economies

Emerging Economies

Per Capita GDP

1990

2000

2010

2015

$44,412

$38,112

$27,734

$18,623

$8,391

$6,165

$3,136

$1,841


If japan is an example plenty of upside to the china story

If Japan Is An Example, Plenty of Upside to the China “Story”

Japan196019651970197519801985

China199520002005201020152020


Does chinese growth threaten booming us exports suggest no

Does Chinese Growth Threaten? Booming US Exports Suggest No.

Growth in US Exports to Top 10 Markets, 2000-11

Source: US Department of Commerce

  • Since the recession officially ended exports have accounted for about half of the nation’s economic growth. Exports account for 14% of GDP, and,, continue to trend upwards

  • For some economists, the US is well positioned to continue to capture market share in emerging economies: Tyler Cowen writes, “the leading categories of American exports today—civilian aircraft, semiconductors, cars, pharmaceuticals, machinery, entertainment…—are going to be in the sweet spot of growing demand in what we now call the developing world.” (American Interest, May/June 2012)


From now until 2018 gdp growth in emerging regions will outpace growth in advanced regions

From Now Until 2018, GDP Growth in Emerging Regions Will Outpace Growth in Advanced Regions

Source: IMF

*MENAAP: Middle East, N. Africa, Afghanistan, and Pakistan


Los angeles boston london frankfurt paris

II

US Economy: Move Out of the Way


Even with unemployment rate falling those unemployed have been unemployed for a long time

Even With Unemployment Rate Falling, Those Unemployed Have Been Unemployed for a Long Time

Unprecedented in post-war era

40.2%

The number of long-term unemployed has nearly tripled during the recession.

  • Long-term unemployment creates “hysteris”

  • If allowed to persist, impacts structure of economy through potential output


And lots of workers still at work part time for economic reasons

And Lots of Workers Still At Work Part-Time for “Economic Reasons”


Something we can all agree on in the us not much of a recovery yet

Something We Can All Agree On? In the US, Not Much of A Recovery…Yet


Labor force participation has shown no signs of recovery

Labor Force Participation Has Shown No Signs of Recovery


Digging into the labor market data lack of hiring accounts for current joblessness

Digging Into the Labor Market Data: Lack of Hiring Accounts for Current Joblessness

Gross job losses each quarter

Gross job gains each quarter

Source: BLS

Updated through Q2 2010


Good news layoffs near record lows quits are on the rise

Good News: Layoffs Near Record Lows, “Quits” Are On the Rise


Restructuring underway services employment rebounds as goods producing and state local declines

Restructuring Underway: Services Employment Rebounds as Goods Producing and State/Local Declines


Restructuring underway services employment rebounds as state local declines

Restructuring Underway: Services Employment Rebounds as State/Local Declines


The us still leads the world in manufactured goods output

The US Still Leads the World In Manufactured Goods Output

U.S.

China

Japan

Germany

UK

Source: United Nations


Long term structural trend toward services away from stuff

Long-Term Structural Trend Toward Services, Away From “Stuff”


The roomba effect

The “Roomba Effect”

Who needs a human when you have me?


The burgeoning robot population

The Burgeoning Robot Population


Five years of labor data tell us a great restructuring is underway

Five Years of Labor Data Tell Us: A Great Restructuring Is Underway

Source: Labor Department

Structural misalignments in the US labor market appear in the sector-by-sector breakdown. Construction and manufacturing led the job declines—and both sectors have yet to recover. However, on net, some sectors like education/health care and professional services have, on net, added to payrolls over the period.


Evidence of structural problems skills mismatch as employers face structural impediments to hiring

Evidence of Structural Problems: Skills Mismatch as Employers Face Structural Impediments to Hiring

Kauffman Foundation poll of entrepreneurs, Sept. 2011

  • Others

  • Taxes 4%

  • Regulatory Uncertainty 3%

  • Ability to penetrate global markets 3%

Finding qualified people

Managing Fast Growth

Accessing Capital

Sluggish Economy

Source: BLS; Kauffman Foundation


Answer to employment problem new business formation drives employment

Answer to Employment Problem: New Business Formation Drives Employment!

Net job creation, 1985-2005

25.3% of the 28,776 engineering and technology companies founded from 1995 to 2005 had an immigrant key founder. These 7,283 companies

produced more than $52 billion dollars in 2005 sales and in 2005 had just under 450,000 employees.

Innovative, creative start-up firms are net job creators, not Fed QE

Large firms

Young Firms

Small firms

Older Firms

Source: Business Formation and Dynamics By Business Age


Start ups and innovation in action

Start-ups and Innovation in Action


Whatever the future brings it might not be part of the routine

Whatever the Future Brings, It Might Not Be Part of the Routine

Unemployment Rate By Job Type

Non Routine: Management, Art, Business Legal, Computer, Science, Architecture, Education, Health, Social, Protection, Building and Grounds, and Personal Food Preparation

Routine: Sales, Office and Administrative, Construction, Maintenance, Production, Transportation

Source: New York Federal Reserve


The us labor market is improving job gains continue in q2 2013

The US Labor Market Is Improving: Job Gains Continue in Q2 2013


The composition of world gdp is changing

The Composition of World GDP Is Changing

1998

1991

Over 26 Years….

Europe Cedes Ground from 22% of World GDP to 11%

China Grows from 4% to 19% of World GDP

Rest of World Increases Share of World GDP from 40% to 47%

2008

2018

Rest of world includes all countries other than US, euro area, China and Japan

Gross domestic product based on purchasing-power-parity (PPP) valuation of country GDP.”

Source: IMF


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