Amazon…Meta…Alphabet…and now Spotify is the latest to announce they’ll be laying off around 6% of their workforce.
Unemployment is one of the things to watch for as the economy slows. Still, unemployment in the US and Australia have continued to stay strong.
And while big tech keeps laying off workers, those workers may not be unemployed for long.
Here is Bloomberg:
‘While the Consumer Electronics Show in Las Vegas is best known as an annual excuse to marvel at outlandish gadgets, Dirk Hilgenberg, head of Volkswagen AG’s software unit, came to this year’s show in early January looking for a different kind of tech product: software engineers.
‘The 58-year-old German auto executive turned his CES booth, a colorful stack of shipping containers, into a makeshift hiring hall with the words “JOIN US” emblazoned across the side. His unit, dubbed Cariad, has quintupled its headcount, to about 6,600, since its formation in July 2020, and Hilgenberg is hoping to hire an additional 1,700 people this year.’
The auto industry is going through plenty of disruption. Big data…autonomous cars…electrification…
Tesla, for example, collects a lot of driving data. But that’s a story for another day.
My point is that we may keep hearing about layoffs, but many industries are still struggling to find workers. We are seeing labour shortages in construction, mining…and clean energy manufacturing, of course.
So much so that renewable energy companies are bumping up salaries to attract workers and are even looking at alternative ideas, such as buying up other companies just to get their workers.
‘The energy world is in the early phase of a new industrial age — the age of clean energy technology manufacturing,’ writes the International Energy Agency in a new report.
The IEA expects that the cleantech manufacturing industry will grow threefold by 2030 and be worth around US$650 billion a year.
So while things are looking shaky in some areas of the economy, there are still plenty of opportunities out there.
Billions are pouring into clean energy
While central banks are raising rates, there’s still plenty of money flowing into some sectors of the economy.
As I mentioned last week, the European Union is looking at offering incentives to compete with the US’s Inflation Reduction Act (IRA). They are concerned they could lose out on investment.
Over the next decade, the IRA is expected to pump billions into the US’s clean energy and manufacturing industries. The Congressional Budget Office expects that number could be US$374 billion.
But the effects of the IRA could extend much further.
In a recent report, Credit Suisse estimated the IRA ‘will have a profound effect across industries in the next decade and beyond.’
As an article from The Atlantic writes after looking at the report:
‘[T]he IRA might spend twice as much as Congress thinks. Many of the IRA’s most important provisions, such as its incentives for electric vehicles and zero-carbon electricity, are “uncapped” tax credits. That means that as long as you meet their terms, the government will award them: There’s no budget or limit written into the law that restricts how much the government can spend.
‘[S]o many people and businesses will use those tax credits that the IRA’s total spending is likely to be more than $800 billion, double what the CBO projects. And because federal spending tends to catalyze private investment, that could send total climate spending across the economy to roughly $1.7 trillion over the next 10 years.’
In short, there’s a lot of money flowing into cleantech manufacturing…into developing supply chains, but this is also about cheap electricity.
It’s a global race to the bottom
Manufacturing, bringing supply chains closer to home, onshoring, nearshoring…for all this, you need cheap electricity to be competitive.
At the moment, manufacturers are struggling with high energy costs. At the same time, renewables have become the cheapest forms of power today.
So the global competition is on to shift into the cheapest source of energy out there.
And going back to Credit Suisse’s report, the bank expects investment from the IRA could give the US a leg up when it comes to cheaper electricity.
As The Atlantic continued:
‘The U.S. is “poised to become the world’s leading energy provider,” according to the bank. America is already the world’s largest producer of oil and natural gas. The IRA could further enhance its advantage in all forms of energy production, giving it a “competitive advantage in low-cost clean electricity and hydrogen production, infrastructure, geologic storage, and human capital,” the report states. By 2029, U.S. solar and wind could be the cheapest in the world at less than $5 per megawatt-hour, the bank projects; it will also become competitive in hydrogen, carbon capture and storage, and wind turbines.’
So while much of the reasoning for the energy transition has been touted as being for the climate, it’s also about energy security and having access to cheap electricity as countries bring more manufacturing onshore.
This is a megatrend that will continue to play, in particular into commodities.
So if you haven’t already, I recommend you check out James Cooper’s recent presentation, ‘The Age of Scarcity’. My colleague, James, is a trained geologist, and he’s just launched his new service, Diggers and Drillers.
Editor, Money Morning
PS: Due to the Australia Day public holiday, there won’t be a Thursday edition of Money Morning this week. We’ll be back to our regular schedule on Friday, 27 January.