#424. What Excites Us About the Future for Agracel – Part I (Macro Trends for the Future)

Posted on | The Agurban

Macro Trends for the Future

There are a number of very positive trends that will greatly impact Agracel for years if not decades into the future. These trends can be broken down into six broad ones:

  1. Oil & gas independence (378, 379, 391, 392, 397, 398)
  2. Reshoring USA manufacturing (415, 375)
  3. USA auto industry growth (368, 380)
  4. Right to Work & American productivity
  5. USA demographics
  6. The return of inflation

Over the past couple of years, we have talked extensively about the first three trends listed above. (Click on the link behind the trend above for past Agurban on that topic.) This week, we will share our view on Right to Work and American Productivity. Next week we will touch on USA Demographics, and then finish out our series with The Return of Inflation.

Right to Work & American Productivity

A thunderclap hit labor unions in mid-December, when Michigan, the birthplace of America’s labor movement passed Right to Work (RTW) legislation and became the 24th state to become a RTW state. We prefer to call it Freedom to Work, having seen dramatic increases in new manufacturing plants in RTW states. From 1980 to 2011 total employment in RTW states increased by 71%, compared to only 32% in non-RTW states. Michigan’s employment was up only 14% during that same period of time and in many ways was in a one-state depression for the past decade. Detroit, at one time America’s Silicon Valley during the development of the automobile was especially hard hit, with 34.5% of its citizens on food stamps, 45.7% out of the workforce, and 99,702 out of the 363,000 homes in the city sitting vacant.

Michigan had seen what happened in IN which passed RTW legislation in February, quickly adding 43,000 new jobs in 2012 even as MI was continuing to lose them during the year. An example was CAT moving its London, Ontario railroad plant to Muncie soon after the state passed RTW.

Kevin Brinegar, CEO of the Indiana State Chamber of Commerce, state why RTW was so important for his state, “We heard there are 30 to 50% of projects and investments that, if you’re not a right-to-work state, you don’t even get to step into the batter’s box and take a swing at. Selfishly, we would have been very happy to be the only RTW state in the industrial Midwest for a long, long time.

Productivity is critically important to American manufacturing being able to compete with those of other countries. Gains in productivity are why wages in the manufacturing sector have continued to climb and are some of the highest when compared to other industries. William Strauss, senior economist at the Federal Reserve of Chicago, explained it best when he stated that what it took 1,000 workers to do in 1960 can now be done with only 184. These gains in productivity are driven by technology and more efficient business models.

Next week we will share with you why the demographic changes throughout the world may be beneficial to the United States.