Now at the end of a debt supercycle, job losses in highly cyclical sectors like retail, finance, transport and real estate are spreading to connected industry and services worldwide. The transition here is likely to be more secular and durable than most imagine.
Heavily indebted and under-saved consumers spend less and will focus on ways to lower operating costs for the next several years. Innovations like electric vehicles (EVs) are the future of transportation because they are cheaper to run, requiring fewer parts and less maintenance than old school internal combustion engines (ICE).
Not just cheaper to run, according to BloombergNEF data, rapidly declining battery costs, suggest electric vehicles will also be cheaper to buy than their ICE counterparts within three years (2022). Two years ago, this was estimated to happen by 2026. As technology accelerates, so do timelines for the transition.
At the same time, though, automation and fewer workers to assemble and service EVs is a headwind for employment. Some 3 million Europeans, 8 million American and a half million Canadian workers, presently work in the ICE industry and related businesses. See more on this in The true price of electric cars. Jobs in areas like EVs and renewable energy production are certainly growing, but they also tend to be more automated and less worker-intensive than the old technologies they replace.
In the first five months of 2019, carmakers cut 38,000 jobs globally. Auto sales in the all-important Chinese market have been slumping for months and this is showing up in lower sales for many related companies in different sectors:
Problems in China’s car market aren’t just a problem for local manufacturers. German chemical giant BASF cited the decline in Chinese auto production as a key reason for a profit warning late Monday.
Massive disruption is needed, but it’s also likely to intensify economic strain in the months ahead as asset markets reprice and economies re-calibrate for the next expansion period.