The deepening fault lines in today’s economic landscape are defined both by education and by geography. There is a widening gap between the haves–well-educated and well-located–and the have-nots. And in the U.S., at least, that divide is going to get worse.
That’s the conclusion of a new study being published later today by the McKinsey Global Institute. It looks at 315 U.S. cities and 3,000 counties and how their workers will be affected by automation over the next couple of decades. My takeaway after reading it: your zip code may be the most important determinant of your economic future.
– The 25 U.S. mega-cities and their peripheries that have led growth in the last decade—home to roughly a third of the workforce—will continue to capture 60% of job growth through 2030, according to the study.
– By contrast, 54 trailing cities and 2,000 rural counties—home to a quarter of the population—will suffer, with virtually no growth in employment.
– The remaining cities and counties represent a muddy middle, where job growth will be possible, but not certain.
The report should be a call to action, particularly for cities and counties in the muddy middle. “America is a mosaic of local economies on diverging trajectories,” the report says, and “automaton could widen existing disparities.” But communities have an opportunity to improve their odds by working to build the “workforce of the future,” creating job and skill training programs and encouraging smart employer-educator partnerships. As I’ve said before in this space, preparing workers for the next wave of automation may be the defining challenge of our times. This report suggests every community needs to put it at the top of their priority list.
Other findings from the report:
– The education fault line will grow deeper: Individuals with a high school degree or less are four times more likely to hold roles that can be automated than people with bachelor degrees.
– As the education fault line deepens, so will racial fault lines: as many as 12 million Hispanic and African-American workers may be displaced.
The report will be published later today at McKinsey.com. More news below.
Another tension dispatch from the Strait of Hormuz: the British defense ministry says one of the country’s oil tankers was menaced by three Iranian boats, necessitating the intervention of the British warship HMS Montrose. The Brits say the Iranian boats withdrew after “verbal warnings.” The Iranians say the whole thing never happened. Sky News
France’s plans to impose a hefty new tax on digital giants really does look like it will cause a big spat with the U.S. American trade officials are probing the plan, on the basis that it could unfairly target U.S. firms. Trade Representative Robert Lighthizer: “The president has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.” Wall Street Journal
Fed chief Jerome Powell made a few interesting comments when testifying to the House Financial Services Committee yesterday. He noted that the economic outlook hasn’t improved in recent weeks, thus raising expectations of an imminent rate cut. He said a return to the gold standard would be a bad idea (it raises the risk of ignoring unemployment figures.) And he expressed “serious concerns” about Facebook’s Libra cryptocurrency play, as a result knocking an eighth off the Bitcoin price. CNBC
Deutsche Bank, which is already subject to a U.S. money-laundering probe, is now reportedly also being dragged into the frame of the 1MDB corruption investigation. (The Malaysian economic-development fund was plundered.) Deutsche Bank helped the fund raise its capital at a time when concerns about its management were already growing, and now U.S. officials want to know if it broke corruption and anti-money-laundering laws. WSJ
AROUND THE WATER COOLER
Deutsche Bank only cut its ties with accused sex-trafficker Jeffrey Epstein earlier this year, when the feds were closing in on him, according to Bloomberg, which writes: “The revelation of the closed accounts adds to the mystery surrounding Epstein’s supposed fortune. Despite his lavish lifestyle and rich acquaintances, the extent of his wealth—and how he acquired it—remains unclear.” Bloomberg
The Financial Times has a good explainer of likely-Prime-Minister Boris Johnson’s claims about a no-deal Brexit (it won’t be that bad, and/or the EU will flinch first) and how they will fare when they clash with reality. FT
Lega, the party of Italy’s far-right deputy prime minister, Matteo Salvini, allegedly tried (at least) to solicit Russian oil money for its coffers. BuzzFeed News says it has a tape of a meeting between a Salvini aide, two Italians and three Russians, in which they discuss the deal—which would have been illegal, had it taken place. Did it? Two former prime ministers want an urgent inquiry. BuzzFeed
Fannie Mae CEO Hugh Frater writes for Fortune that student debt has delayed millennials’ first home purchases, as has the fact that house prices are “out of whack.” He writes: “Fannie Mae survey research shows that there is often a gap between perception and reality when it comes to what it takes to qualify for a mortgage. That is, many younger people who don’t own a home think they would not qualify for a mortgage, when in fact they could.” Fortune