As a general rule the most successful man in life is the
man who has the best information
According to the Organization for Economic Co-operation and Development (ODEC) the combined
economies of Germany, France and Italy will grow
by under one percent this year. OECD forecast the US economy will grow at
a 0.4 per cent annualized
rate in the fourth quarter, while
in Europe, the three largest
economies (Germany, France and Italy)
will contract by 0.4
percent over the same period.
The latest employment report compiled for
the US Conference of Mayors
by IHS Global Insight outlined economic
growth and employment
prospects for 363 major metropolitan areas - one in
eight American cities will have no growth in jobs between 2001 and 2021.
According to the report:
- 48
major metropolitan areas will
not return to their pre-recession
peak employment levels until after 2021
- Forty six of those
cities have had net
job losses between
2001 and 2011, that’s two lost decades of job growth
- 166
metropolitan areas lost
jobs between 2001 and 2011
- Seventy eight
metropolitan areas have had
more than ten
percent of their jobs wiped
out
In the last two years federal, state and local governments have laid off close to 500,000 workers and there will be hundreds
of thousands more. These layoffs are a self-perpetuating
cycle – this is because, at the state and local
levels, the layoffs are concentrated in the areas hardest
hit by the economic crisis
- the falling employment level cuts tax
revenue from these areas so services are reduced, a reduction in services means
more layoffs, less tax revenue, more layoffs.
The US Conference
of Mayors employment
report is based on extremely optimistic assumptions - the authors expect a growth rate of 3.5
percent in the second half of 2011, unfortunately the US economy is losing momentum
and expanded at an annual rate of only .7 percent
in the first half of 2011.
According to figures recently released by the National Association of Realtors the housing slump is getting
worse - existing home
sales fell 3.8 percent in May and were down 15.3 percent year
over year - home values have fallen
for nine consecutive months, dropping 7.8 percent
over the past two quarters.
The Thomson Reuters/University
of Michigan’s measure
of consumer sentiment fell, in July, to its lowest level
since November 2008.
The Bloomberg Consumer Comfort
Index has been stuck below
minus 40 - the level associated
with recessions or their aftermath - since the end of February.
Manufacturing is losing
momentum, the Institute for Supply
Management’s factory
index fell in August to 50.6 - less
than 50 signals a
contraction.
The Bureau of Labor Statistics
reported, on Friday September
2nd, that the US economy did not generate any net new jobs during the month of August.
There are 14 million Americans
out of work, there are
8.8 million Americans working
part time who want full
time work and there are
six million Americans who
have been out of work for at
least six months. The unemployment
figure the BLS reported on September
2nd was 9.1 percent of Americans
out of work compared to
8.8 percent in March.
There cannot be, there won’t
be, an economic recovery until people are back
to work. Any economic recovery without a corresponding
increase in jobs is a
false recovery and is not
sustainable.
We have a global crisis
in existing infrastructure
In a 2007 report, Booz Allen Hamilton estimated that investment needed to “modernize obsolescent systems
and meet expanding demand” for infrastructure worldwide
between 2005 and 2030 was
about US$ 41 trillion.
Infrastructure spending
geographically:
- Middle
East $0.9 trillion
- Africa
$1.1 trillion
- US/Canada
$6.5 trillion
- South
America/Latin America
$7.4 trillion
- Europe
$9.1 trillion
- Asia/Oceania $15.8 trillion
Infrastructure spending
by sector:
- Water
and wastewater $22.6 trillion
- Power
$9.0 trillion
- Road
and rail $7.8 trillion
- Airports/seaports $1.6 trillion
In January of 2009
CIBC World Markets issued
a study that said a sharp deterioration in existing
infrastructure could lead to as much
as $35 trillion in public works spending
over the next 20 years.
- North
America $180 billion/year
- Europe
$205 billion/year
- Asia
$400 billion/year
- Africa
$10 billion/year
The World Economic
Forum’s report, Positive Infrastructure, released in May 2010 finds that the world faces a global physical,
hard asset, infrastructure deficit
of US$ 2 trillion per year over the next 20 years.
US infrastructure
In 2009 the American Society of Civil Engineers
(ASCE) updated their 2005
report on US infrastructure - no area rates higher than a C+. Roads, aviation, and
transit declined in score while
dams, schools, drinking water, and wastewater held at D or lower. One category, energy, improved, from a D to a D+. Below are the 2009 grades and new spending
requirement:
- Aviation
D
- Bridges
C
- Dams
D
- Drinking
Water D-
- Energy
D+
- Hazardous
Waste D
- Inland
Waterways D-
- Levees
D-
- Public
Parks and Recreation
C-
- Rail
C-
- Roads
D-
- Schools
D
- Solid
Waste C+
- Transit
D
- Wastewater
D-
- America's
Infrastructure GPA: D
- Estimated
5 Year Investment:
$2.2 Trillion
The 2009 fiscal stimulus package - the American
Recovery and Reinvestment
Act (ARRA) - included $72
billion for infrastructure upgrades - enough to cover just six percent of the 5
year infrastructure deficit
estimated by the ASCE.
Electrical Grid
ASCE’s Report Card for America's
Infrastructure gives the US Electric Grid a rating of D, its summary:
“The U.S. power transmission system is in urgent need of modernization. Growth in electricity demand and investment in new power plants has not been matched by investment in new
transmission facilities. Maintenance expenditures have decreased 1%
per year since 1992. Existing transmission facilities
were not designed for the
current level of demand, resulting in an increased number of "bottlenecks," which increase costs to consumers and elevate the risk of blackouts.”
“Our grids
today are more stressed than they have been in the past three decades.
If we don’t expand our capacity
to keep up with an increase in demand of 40
percent over the next 25 years,
we’re going to see healthy grids
become increasingly less reliable. Today, with the grid operating flat-out, any
disruption—like the downed
transmission line that sparked
the 2003 blackout in the Northeast—can cripple the network.”
Kevin Kolevar, assistant secretary
for electricity delivery
and energy reliability at the Department of Energy
High Speed Rail (HSR)
“To attract
new businesses to our shores,
we need the fastest, most reliable ways to move people, goods, and information — from
high-speed rail to high-speed
internet.” Excerpt
from US President Obama’s State of the Union address
Obama has called
for eighty percent of Americans
to have access to high
speed rail by 2036 - currently no American has access to high speed rail.
A projection from
rail proponents FourBillion.com indicates
that building the 9,000 miles of high speed corridors identified
by the U.S. Department of Transportation would:
- Create
4.5 million permanent jobs and 1.6 million construction jobs
- Save
125 million barrels of oil
- Eliminate
20 million pounds of CO2 per mile per year
- Reinvigorate
U.S. manufacturing
- Generate
$23 billion in economic benefits
in the US Midwest alone
These new lines also
require massive support infrastructure: stations, metro transport links in cities
and modern signaling/safety
systems.
"It is unacceptable when countries like China are building high-speed
rail networks and gleaming new airports
while more than a million
construction workers who could be doing
the same thing are unemployed right here in America." President Obama
Information technology
(IT) infrastructure
IT infrastructure comprises the wireless spectrum and the
high-tech machinery that allows us to link to each other electronically
– especially broadband
high speed internet.
The Phoenix Center for Advance
Legal and Economic Public
Policy Studies reported,
in a study published October 2010, that ten Information technology (IT)
sector jobs are created
for $1 million in capital investment by the industry. The Phoenix center also
said that median earnings in communications
jobs are higher than average private sector jobs.
Deloitte has recently released
a study that estimates that for every increase of $1 million in
wireless broadband investment 15 new U.S. jobs are created.
Conclusion
On Thursday, September
8th, President Obama unveiled
a US $447-billion jobs package that includes:
- Extension
of payroll tax
breaks
- Money
to fix schools
- Aid
for cash strapped state governments
- Road,
rail and air infrastructure spending
In an effort to eliminate
red tape and interparty wrangling President Obama has ordered several federal agencies – the departments of Agriculture, Commerce, Housing
and Urban Development, Interior, and Transportation - to identify
"high-impact, job-creating infrastructure projects"
that can be expedited immediately and without congressional approval. Each department has been told to select up to three high-priority infrastructure projects
that can be completed totally within the control and jurisdiction of the federal government.
“In keeping
with a recommendation from my Jobs Council, today I’m directing certain federal agencies to identify high-priority infrastructure projects
that can put people back
to work. And these projects — these are projects that are already funded, and with some focused
attention, we could expedite the permitting decisions and reviews necessary to get construction underway more quickly while still protecting
safety, public health,
and the environment.” President
Obama
Infrastructure projects
create jobs. But the number
of jobs created or saved
by the $25 billion in Recovery Act
spending on roads was just 150,000 over two years.
Smart Growth America’s analysis of federal spending from 2009′s American Recovery
and Reinvestment Act
(ARRA) show that funds spent on public transportation were
a more effective job creator than
stimulus funds spent on highways:
- Every
billion dollars spent on public transportation
produced 19,299 job-months
- Every
billion dollars spent on projects
funded under highway infrastructure programs produced
10,493 job-months
US infrastructure needs
are real, improvements in this
area are critical to long-term
economic growth: good airports, roads, bridges and
rails increase national competitiveness,
lower costs of transporting goods and
encourage investment.
But initiatives like
payroll tax cuts, upgrading the electrical grid and the
building of high speed rail and Information technology (IT) infrastructure will
create more permanent high
paying jobs than repaving roads and upgrading bridges.
Picking the right infrastructure projects will boost productivity throughout the US economy and
massive stimulus packages that focus on creating jobs at home will, in this authors opinion, become very popular with all governments looking to generate massive employment and restart the global economy.
Is infrastructure, and how to profit from this soon
to be dominant, global investment
theme on your radar screen?
If not, maybe it should be.
Richard Mills
Aheadoftheherd.com
If you're
interested in learning more about the junior resource market please come and
visit Richard at www.aheadoftheherd.com. Membership is free, no credit card or personal
information is asked for.
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