The nonfarm payrolls report was released on Friday. The U.S. labor force gained 192,000 jobs, missing the various estimates and prognostications that the various estimators and prognosticators put out. The unemployment rate was unchanged at 6.7%.
As a country, we spend an inordinate amount of time focusing on this monthly jobs jumble. Up one month, another down. Beat estimates, miss estimates … maybe match them. Only to have it all revised the next month. Who cares? For there is a much, much larger trend already unfolding that promises to radically reset the American jobs market.
It’s what I call a “Big Idea.” Alas, Big Ideas often strike observers as so unlikely that they’re flaky. The dismissive brush aside such ideas because they can’t see how various dots connect, and they refuse to believe that tomorrow will be meaningfully different than today. They miss what’s coming at them, and are shocked when it arrives.
This is the story of what’s coming at you …
I spent a few days in Madrid back in March, and on my last day I popped into a McDonald’s for a quick snack before heading off to the airport. Just inside the doors, I came upon something I’ve never before seen in a Mickey D’s. When I saw it, I knew instantly that upheaval is heading for America.
Inside the doors, I found this:
You are looking at the future of fast-food employment in America … by which I mean future unemployment.
The pictures show the new self-order, self-serve kiosks that McDonald’s has begun to install in its eateries. They’re exceedingly simple to use. They operate in multiple languages. They accept cash and plastic. You can supersize or modify your order however you want on the screen. For a newcomer, they require, maybe, 90 seconds to place an order, though a veteran user would need 45 seconds or less. You don’t have to wait in long lines, and your order is delivered to a segregated area away from the rest of the crowd awaiting the food they ordered the traditional way.
This particular McDonald’s, an otherwise typical McDonald’s with staff taking orders at the counter, had four kiosks. But a store-of-the-future could easily house a dozen or more.[inlinetweet prefix=”” tweeter=”@SovereignInvest” suffix=”#EconomicData”]Looked at as a self-contained observation, these machines are revolutionary simply because they tell you that the average fast-food outlet soon will need fewer workers.[/inlinetweet]
But this is not a self-contained observation.
Another dot we must connect.
And that dot, combined with these self-order kiosks, will upheave America. Jobs will vanish. Unemployment will rise sharply. Congress and the Federal Reserve, whose mandate includes full employment, will struggle to contain the fallout.
Violence is possible.
Building Momentum for Robots
Out in San Francisco, a company you’ve probably never heard of — Momentum Machines — is on the verge of exterminating just about everyone who works for a fast-food restaurant.
Momentum has designed a machine that consumes just 24 square feet, roughly 1% of the space required for an average McDonald’s food-prep area. It can fashion 360 perfectly cooked, custom-made burgers per hour, well beyond any lunch-time demand. The robotic burger flipper is loaded with freshly ground beef, cheese and raw vegetables — lettuce, pickles, onions and tomatoes — and stamps out fresh patties only after a customer enters an order. It grills the meat to order, and then builds a custom burger, stacking the patty and whatever toppings on a freshly grilled bun.
The story here, though, isn’t so much about the whiz-bang technology, but what this technology portends.
No offense to fast-food workers, but taking orders, building burgers and salting fries doesn’t require a substantial skillset. These are jobs that technology can do quicker, safer, better, cheaper, cleaner, more efficiently and in a smaller, less costly space.
Momentum’s burger machine replaces just about every human in the burger-making process, except the one or two needed for keeping the machines stocked with necessary ingredients — and those jobs are temporary, at best, since additional machines will obviate that need. The ordering kiosks, meanwhile, eliminate the need for any front-counter staff, except maybe a computer technician to handle a machine that goes down.
A typical fast-food joint spends roughly $150,000 a year on staffing. One machine replacing just about every worker pays for itself in less than a year. It does away with employee problems. It does away with HR issues. It does away with discrimination claims and overtime-abuse claims. It does away with the cost of health care and retirement benefits. It dramatically reduces contamination risks introduced by employees who are not as hygienic as they should be. It allows fast-food store owners to sharply improve their profit margins as they reduce store footprints, saving on land or rental costs. It allows stores to operate 24 hours a day, with no staff and machines that power down until an order arrives.
No one calls in sick.
Can you see the writing on the wall?
The Incredible Shrinking Service-Sector Worker
Service-sector America is on the brink of a radical rethink that will spin violently through the country’s 4.1 million fast-food workers. Their jobs will soon be extinct … and that has impacts on your life, even if you don’t work for a fast-food restaurant or even frequent them.
Another 4.1 million jobless workers will rip through other sectors of the economy where unemployed fast-food workers would have spent their paychecks. That, in turn, will continue to shrink household incomes in America — a trend that has been ongoing for more than a decade. It will raise the unemployment rate considerably and potentially permanently, and make increasingly larger numbers of Americans dependent on a government already overly indebted.
That, in turn, would deepen the worries associated with the food insecurities in America today — and, remember, that four out of every five Americans currently lives in “near poverty,” struggling with joblessness, underemployment or dependence on welfare for some portion of their livelihood. That, in turn, leads to anger, frustration, fear, and potentially, violence on the streets of America.
It absolutely means that personal and corporate tax rates are going up as a government gropes for any money to fund the increasing drain on social-services programs like unemployment and food stamps, because doing otherwise would risk social upheaval and violence as millions of jobless Americans — particularly the easily agitated youth — grow increasingly despondent about the lack of income opportunities.
So, I get to the question associated with this Big Idea: Does such a future seem so unlikely that it’s flaky?
Or can you see how a self-order kiosk at a fast-food eatery in Madrid and a burger-making machine from San Francisco are connected in such a fundamental way that, combined, they will one day very soon tear apart the world that you and I know as normal and rebuild it in a profoundly different way?
The rise of the machines has only just begun …
Until next time, stay Sovereign …
Jeff D. Opdyke
Editor, Profit Seeker
Enter your email below to get The Sovereign Investor Daily absolutely Free!