Number of US Workers in Government vs. Manufacturing: Chart

The total number of American workers in the manufacturing sector has been on the decline for many years now. Though the sector has seen a slight uptick in the past couple of years the long-term trend line is down. However one of the sectors that has been booming in recent years in terms of workers employed is the government sector. According to a note by Frank Holmes at US funds, more Americans now work for the government than in manufacturing.

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Source: Is Weak Productivity to Blame for Sluggish Consumer Spending?, US Funds

One of the reason for the growth in government workers is the ever increasing number of regulations. According to an article by Sam Batkins at American Action Forum 600 major regulations have been passed in the 7.5 years of Obama Administration. Higher regulations not only need more workers but compliance costs for industries also go high.

More than 4.18 million workers were employed by the Federal government in 2014 as per data published by the US Office of Personnel Management. This figure includes civilian and  military personnel.

Average Houry Rate for Auto Workers in Select Countries

The average hourly wage for auto workers in Mexico is increasing according to a recent article in the journal. Major automakers expanding or opening factories there are offering higher wages, benefits and incentives to attract workers. The competition among auto makers to attract and retain auto workers is high.

Global auto manufacturers flock to Mexico and other emerging countries due to their cost advantage. Hourly wages in Mexico, Brazil, China, India, etc. are much lower than in developed countries like shown in the graphic below:

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Source: It’s Getting Harder and More Expensive to Make Cars in Mexico, WSJ, Aug 14, 2016

Mexicans working at the auto factories get between $1 an hour to $ 3 an hour. Mexico’s minimum wage is 73 pesos or $4 a day. Hence auto workers earn much more than the prevailing minimum wage. Despite this Mexican workers are far cheaper since in all the developed countries hourly wages run into double digits. Mexico has many advantages for auto manufacturing due to many factors including the cheap labor, railroad and road transportation links and close proximity to the US.

As long as wages are cheap in emerging countries auto makers will exploit that.It is interesting to note that though auto makers have shifted manufacturing to lower cost countries prices of autos have not come down. In fact an average car costs around $20,000 these days. Pickups, SUVs and other types of vehicles cost double that if not more and have much higher profit margin for auto makers.


Australia has the Fifth Highest Debt-to-Disposable Income Globally

Households in Australia have high debt levels compared to historical figures. According to the latest OECD data available, Australia’s debt-to-net-disposable-income ratio now stands at 206% and is the fifth-highest in the world as shown in the chart below:

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Source: Is Australia’s luck running out? by Robin Parbrook, Schroder’s

Extended high debt together with over heated housing sector does not bode well for households. Should the housing sector falter consumers will de-leverage sharply.

Percentage of Daily Smokers As a Share of Total Adult Population in OECD Countries

Smoking rates have declined by one fourth since 2000, according to a report by the OECD. About 19% of the daily population smoked daily in 2014, the latest year for which data is available. But the rate varies widely across OECD member nations.

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Source: OECD

The former Soviet republic of Lativa has the highest percentage of smokers at 36% and Mexico has the lowest at just 8%. The average OECD rate is 19%. Next to Mexico, Sweden and the US have the lowest rates. Smoking rates are lower in Scandinavian countries.

Despite the decline in OECD countries, global tobacco  giants are growing and their profits are going up. This is because while sales is declining developed countries they are soaring in developing countries. Tobacco usage is increasing in emerging countries like China, Indonesia, India, etc.

Last  week Britain-based British American Tobacco Plc(BTI) offered to buy the rest of Reynolds American Inc(RAI) that it doesn’t already own. In general major tobacco firms are the favorite of income seeking investors. Other companies in the tobacco industry include Philip Morris International, Inc.(PM), Imperial Tobacco PLC (ITYBY), Altria Group Inc.(MO),  and Lorillard, Inc.(LO).


Disclosure: No Positions

On The Monopoly and Oligopoly Madness In Most US Industries

The US is considered as the most competitive market in the world. However in reality most of the major industries are a form of monopoly or oligopoly. When industries are dominated by one company or a handful of companies customer suffer as prices inevitably increase due to pricing shower and lack of competition. But investors and management in these firms benefit as profits rise.

I written about the scourge of  monopolies and oligopolies in the airline, railroad, cable tv, ratings industries before. Other industries such as auto manufacturing, bus transportation, passenger rail transportation, food, healthcare, entertainment, media, etc. are also plagued by this phenomenon. But somehow this setup is accepted by the state and the public. And then the same public wonders why customer service is awful in most companies, why wages are stagnant, why the rich get richer and the poor get poorer, why bills keep going up and up every year, why politics is corrupted by big money, etc.

Yesterday news broke that the telecom giant AT&T(T) is going to acquire cable TV giant Time Warner(TWX). If this deal goes thru it will be another nail in the coffin for competition. Already most cable companies including Comcast(CMCSA) are notorious for price gouging and bad customer service. This merger, if approved by regulators, would further hurt American consumers.

The following chart shows the evolution of AT&T and Time Warner:

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Source: AT&T Is in Advanced Talks to Acquire Time Warner, WSJ, Oct 21, 2016

Disclosure: No Positions

Public Social Spending as a Percentage of GDP Across OECD Countries

Social spending includes various benefits offered by a country to its residents such as healthcare, pensions, social security,  food stamps, relocation money provided to refugees, funding for community activities for illegals, etc. This expenditure varies widely across OECD member countries.

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Source: OECD

France tops the list with social spending amounting to over 31% of the GDP and Mexico spends the least at 7.5%. The US spends slightly less than the OECD average of 21%.