Just read an interesting article about whether technological breakthroughs lead to economic productivity gains (conventional economic thinking, eg electricity in the 1920’s and computers in the 1990’s) or whether a tight labour market creates circumstances that induce innovation and technological advances in order to achieve productivity gains.
[[[[[ … the Fed is not all-powerful. The current round of rate hikes has not, so far, done much to cool off the labor market. If that continues to be the case, then we may be in for a period of sustained productivity growth and rising income. ]]]]]
An increasingly aggressive China over the past 5-10 years has put the brakes on unfettered offshoring from the West to China, and germinated the on-shoring movement where productive capacity and jobs are being repatriated to the US and other economically mature western countries. When that clashes with a tight post pandemic labour market, innovation and technological advances are required if there is to be meaningful productivity gains and economic growth.
US economic strength this past year has confounded markets, investors and DJPIN’ers with what has been widely unexpected economic growth. High levels of automation in modern factories opening in the US and probably other western countries requiring fewer, more skilled jobs is the demand driven response fuelling these strong economic gains. With burgeoning application of AI, these productivity gains could well continue for years to come.
America is probably in the process of becoming great again, despite anything Trump prattles on about imo.
No markets go straight up forever like the DOW, S&P and Nas have for the past 6 months, but the above argument (derived from the article linked) offers an interesting explanation for recent surprising widespread economic gains and portends for an interesting 5-10 years to come imo … maybe?
