Sunday, June 2, 2013

The U.S. Consumer, Eurozone Unemployment and "Disruptive Technologies"

Last week, the U.S. Department of Commerce reported that consumer spending in April dropped by 0.2%, the first decline since May 2012, and income growth remained stagnate. In a separate report, the Thomson Reuters/University of Michigan consumer sentiment index increased to 84.5 during May - the highest level since July 2007. 

In the Eurozone, Eurostat reported that unemployment rate for its 17 member countries was 12.2% for April, up from 11.2% a year ago. With 19.4 million people out of work, there was a broad dispersion within youth unemployment (ages 16-25). In Spain, the rate was 56.4%, in Germany 7.5% and Greece 62.5%. 

Also, McKinsey & Co.’s “Disruptive Technologies” research included an interview with Chamath Palihapitiya (managing partner of The Social+Capital Partnership) which highlighted important technology trends including:
  • Sensor Networks - because “the number of physical sensors are just exploding in scale. They’re in the roads, they’re in the air, they’re on your body, they’re in the phone, what have you.... I think we’re not yet ready to really understand the totality of that impact, but it’s going to touch every facet of our lives,”
  • Automated Transportation - because “it is probably the one thing that I’ve seen that could fundamentally have a high…effect on GDP. You can completely reenvision cities, transportation models, and commerce with all these autonomous vehicles, with the ability to ship goods.” and 
  • Applying big data analysis to Genetic Sequencing - because “to make connections, to find correlations, to hopefully find causality… across a broad population of people, you have the ability to use computer science to solve some of the most intricate problems of biology and life.”
  • the problem with many of the productivity gains that we see in the economy today is they actually leave more people behind, in many ways, than they pull forward” and he suggests an increased focus on computer science related education. 
  • Regarding the U.S. consumer – after many months of stimulus efforts by the Federal Reserve to create a “wealth effect” to drive increased consumer spending, it is likely that improving job and income trends are significant factors for a sustained economic recovery. 
  • Regarding Eurozone unemployment - with these troubling trends, especially among the young, it is likely a focus on austerity efforts will decline, while concerns of social unrest, particularly during the summer months, will increase. 
  • Regarding Chamath Palihapitiya’s comments – with global economic trends remaining weak, his focus on several of “the next big things” to drive economic growth is important. As he and others have pointed out, a technically skilled workforce is an important success factor in these efforts.

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