Slow Growth: Good For Stocks, Not Jobs

The U.S. economy is likely to dodge a recession but good jobs will remain hard to find.

The global economy is slowing, because the EU, Japan, China and other emerging economies can’t execute long overdue reforms. Burdened by debt and excess industrial capacity, most seem bent on cheapening their currencies through a combination of capital controls and monetary policies that drive interest rates into negative territory.

Weak global demand and the strong dollar have delivered body blows to U.S. oil, mining and manufacturing. Along with a pullback in holiday spending, fourth quarter GDP registered a weak 0.7 percent.

Oil prices will stay reasonably low further boosting autos sales, and consumer spending for other items should accelerate as ordinary folks become more confident that the “tax cut” afforded by cheaper gas is more or less permanent.

Still, petroleum is poised to be a good news sector.

Shale producers have learned to cope better with oil at $30 a barrel—at least in the near term. U.S. field production has simply not fallen as much as expected and is actually up since Christmas. This resilience frustrates Saudi Arabia’s open throttle strategy to drive small U.S. independents out of business, and now OPEC and Russia finally appear ready to at least consider production cuts.

Overall a strong performance from consumers and a stabilizing petroleum industry should drive GDP up at about 2 percent the first half of the year and 2.4 percent in the second.

Longer term, fundamental changes are redefining the U.S. economy. The shift from manufacturing to services no longer means trading high labor productivity for low. Breakthroughs in artificial intelligence and robotics will make it possible to replace 90 percent of all jobs with smart machines by 2030, and will benefit non-industrial activities most. Chores as sophisticated as a dentist filling a tooth may be replaced by a remarkably dexterous robot.