Where is the technological unemployment?

US unemployment just hit a 50 year low.  Ugh?

I'm no Luddite. I understand that as machines increase productivity, society can compensate by consuming more and more goods and services thereby sustaining full employment.

To wit, in 1870, almost 50 percent of the U.S. population was employed in agriculture. Today less than 2 percent of the population is directly employed in agriculture; yet assisted by technology these few farmers produce enough food to sustain an obesity epidemic, wastage and export.

Another obvious example is US manufacturing which has grown about 3X in the last half century, even while manufacturing jobs have dropped 40%.


So now 80% of people work in services, and we see a never ending boom in restaurants, therapists, beauty salons, and other luxuries, successfully keeping employment high. We keep consuming more products and more services. We have bigger wardrobes and waste more clothes, eat out more, eat more, travel more, and fill our houses with junk.

So far so good. OK I'm not sure it's good (for us, or for the planet), but its good for the economy. However technology change is accelerating, and I always assumed that at some point the pace of technology change would outpace the ability of society to invent new luxuries and re-purpose our employees. In recent years, retails stores have been increasingly replaced by eCommerce, supermarket checkouts have gone person-less, passport control is automated. Everywhere we look there are machines where a person once stood. And still there is virtually no unemployment.

Any day now Waymo will offer truly driver-less taxis in Phoenix. Now 2% of Americans are drivers and in the coming years they may all be replaced by machines. Will we invent new luxuries fast enough to employ them all?

I'll reflect on that during my next bee string facial, which, I would expect, might be applied by an ex-truck driver.

Why does Trump want lower interest rates?

President Trump is continuing to push for lower interest rates. Of course this puts at risk the independence of the Federal Reserve which may be a dangerous precedent. But this consideration aside, why does Trump desire lower interest rates (aka printing money)?

No doubt Trump thinks that lower interest rates, which means more money in circulation, will help the economy to grow in the run up to the 2020 election. Can printing money really cause the economy to grow?

It is true that the Phillips Curve shows a correlation between increasing inflation, which means more money, and lower unemployment. But economists have established that this is a short term effect only. Pumping money into the economy (aka lowering interest rates) may lead to some growth in the short term, until prices and wages take the time to adjust to a newer higher level at which point the extra money has created nothing more than inflation. The economy goes back to where it started with prices and wages higher in dollar terms, but just the same in real inflation-adjusted terms.

Admittedly, in a year before election this short term boost may be tempting. However, the US is currently enjoying record low unemployment. Everyone is working in factories, restaurants, beauty salons and offices, producing goods and services. In such a situation where the economy is already running at full tilt, its hard to imagine that printing more money will grow the economy even in the short term.

So why is Trump pushing for interest rate cuts? Maybe he's lining up a scapegoat in case a recession is coming. Perhaps he's trying to distract the media from Ukraine-gate. Or perhaps he simply misunderstands that you cannot grow an economy, especially one which is already at virtually full employment, simply by lowering interest rates and printing money.