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Amazon’s 75,000 New Robots Are Your Answer To No Wage Inflation

Courtesy of John Mauldin, Mauldin Economics

Like millions of other people, I am a fan and a user of Amazon.

They do make buying things convenient, especially little things that you might have to go to art specialty stores to find. I’m a huge user of the Kindle app, too.

I will admit that I don’t quite understand the Amazon business model of growth over profits. But I have noticed that most of the profits Amazon actually makes are coming from their non-commercial side—stuff like cloud services.

Be that as it may, there is a semi-dark side to Amazon. They are slowly but surely eating retail jobs.

Amazon Is Not the Only One to Be Blamed

Now, to be fair, Amazon represents only a small portion of US retail sales, but it accounts for an outsized portion of the growth in retail sales.

And, again to be fair, Amazon does not do even a majority of online sales, since other online retailers are just as aggressively pushing their own products.

To be even more fair, a great deal of the problem in American retail jobs and businesses is that we simply have too many retail stores.

Reasonable analysis that I’ve read suggests that we have anywhere from 10 to 15% more retail stores than we actually need.

Now, that’s good for competition and choice, but it is just one more reason why there is going to be a consolidation in retail companies and further losses of retail jobs.

What’s That Going to Do for the Wage-Inflation Issue?

As we head into 2018, there are a few dark clouds here and there, but I am mostly optimistic. I do think the primary risk in 2018 will be major central bank policy errors.

I will probably repeat these figures again this weekend, but between the $450 billion that the Fed intends to pull out of its balance sheet and the $500 billion by which the ECB is going to reduce its QE, there will be almost $1 trillion going into the market.

Since the Fed, and especially Ben Bernanke, took credit for the rise in asset prices induced by its QE, why this Fed thinks that quantitative tightening (QT) will have no effect at all on the market is quite beyond me.

It’s one thing to raise rates, which they should have done years ago, and it’s another thing altogether to raise rates and fire up a QT program at the same time.

I think they will be doing this at precisely the wrong time and for the wrong reasons.

In the meantime, let’s look at one of the technological forces, Amazon, and the tidal wave of online sales that is putting pressure on the retail sales market. You wonder why there has been no wage inflation when, theoretically, unemployment is so low?

Here’s one of a number of answers: Amazon has hired approximately 75,000 robots just this year.

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