The nation’s factories cut back total production in the past month, implying a marked reduction in economic momentum. Though GDP in the second quarter grew at brisk pace of 3.7 percent, activity in the second half will be notably weaker at around two percent growth.
Specifically, industrial production fell 0.4 percent in August from a month ago and is now higher by only 0.9 percent from one year ago. That is the bare minimum needed to keep the economy moving ahead.
The production of consumer goods is moving ahead at a decent pace of 2.6 percent. But the production of business equipment and construction supplies is lagging behind.
Manufacturing sector jobs, in the meantime, have been falling. Just as agriculture production has been largely mechanized over the long haul, repetitive assembly line work could be vulnerable to automation. The jobs that are being created are for those who build machines and robots. As such, employment in professional and technical services (such as computer systems design and engineering services) is rising.
It is projected that possibly over half of current jobs could be replaced by machines and robots within 50 years. The Luddites and socialists in Britain at the beginning of Industrial Revolution went from factory to factory to smash machines. Of course we know in hindsight that it was the Industrial Revolution that pushed Britain, and subsequently other Western economies, to rise and greatly improve people’s standard of living over time. However the replacement of brawn with brain will lead to greater income inequality. That is, workers at Google and Facebook will do well while those working in factories may have to constantly look over their shoulder.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.