This Gap Is About To Break The Economy...

The U.S. has lost over 5 million manufacturing jobs in the last 20 years, and at the same time, we're now spending trillions trying to get them back. And while manufacturing is at all-time highs, unemployment is starting to go up, which is creating this crazy gap in the economy that could have serious repercussions for all of us. But if companies are coming home, manufacturing is coming home, then why aren't the jobs showing up? Why are companies building billion-dollar plants that employ fewer people than a Walmart? And are manufacturing jobs really coming back, or is this just headlines? Because if we're reshoring, why doesn't it feel like there's opportunity at home on the ground? By the end of this video, we're going to unpack this interesting gap that is happening right now, the repercussions that it could have on the U.S. economy and stock market, and discuss where the U.S. should actually be investing when it comes to jobs. Because it turns out that even though many companies have committed billions of dollars to constructing new manufacturing plants in the U.S., the likelihood of them actually creating jobs might actually not even be a reality. So let's start by taking a look at unemployment, because there's something weird happening even though the U.S. continues to manufacture more and more goods. This is a chart of real manufacturing and trade sales in the U.S. plotted against unemployment. And as you can see, even though we've shed 5 million manufacturing jobs in the U.S. in the last 20 years, unemployment is near its all-time lows. But at the same time, it's slowly starting to creep up. Now these two graphs, when graphed this way, don't really tell a story. But they do tell a story when you invert the unemployment graph. Because as you can see, when this chart is inverted, when unemployment is going down, typically manufacturing is increasing. You can see this clearly right here. Unemployment is reducing, manufacturing is going up. And you can see it to different extents over history. The two lines typically run in parallel when you invert unemployment. But right now, at this moment, when the U.S. is spending trillions of dollars trying to bring manufacturing back to the U.S., something weird is happening. Unemployment, which remember, this is inverted, is actually going up. It's not following the trend of manufacturing. What this means for the U.S. economy is crucial in two different ways. The first is the impact that this is going to have on the economy going forward. And the second is the story that it's telling with respect to what's actually going on with manufacturing. So let's start by looking at what could potentially happen in the economy. Because again, the green line here is unemployment inverted. And what you can see is that fairly typically, when unemployment starts to rise, it typically precedes a fall in the S&P 500. And this makes sense. As less people are employed, there is less money to be spent. And that ultimately has an impact on companies. And when less people have money to invest in those companies or spend money with those companies, usually it is a sign that the stock market is going to turn. So what you can see here very clearly is that with unemployment on the rise, there could be a correction to the market right around the corner. But that's not the whole story here. Because even though the S&P 500 is on the rise right now, the majority of the gains are coming from a group of seven companies. The magnificent seven. Companies that are largely involved in the AI boom. And if you take these seven companies out of the S&P 500, which is S&P 500 minus M7, what you can see is that the majority of companies, without the influence of the AI boom, aren't performing as well as what the stock market would indicate. And this is largely because the rest of the companies in the S&P 500 are just as much affected by unemployment and the amount of money that is available in the economy to spend as you and I would be. So we've got this craziness in manufacturing. But the real question is, why aren't the manufacturing jobs coming back? And why is unemployment increasing if everything seems to be going well with respect to on-shoring production and this whole AI boom? Well, given everything that you're seeing in the news with respect to the AI boom and all the magical things that AI can do, you might think that this change in unemployment has something to do with AI. But the reality is, it doesn't. In fact, MIT just recently did a research study on this very question. How much is AI affecting business in 2025? And with the unemployment rate increasing and the reduction of manufacturing jobs, you might think that it's having a massive impact. But you'd be surprised. Because MIT's study points out that AI hasn't been the striking success in businesses and hasn't eliminated jobs the way that many expected it to. They state in the very first line that despite 30 to 40 billion in enterprise investment into generative AI, this report uncovers a surprising result in that 95% of organizations are getting zero return. And zero return means essentially zero replacement of jobs. So the increase in the unemployment rate has nothing to do with AI. And not only that, the job losses in the manufacturing sector, well, they have nothing to do with AI either. But maybe a little bit to do with AI's distant cousin, which I'll get to in a minute. But what's surprising is that over 80% of organizations have explored or piloted AI solutions. And 40% of them have actually deployed AI tools. But these tools primarily enhance individual productivity, not profit and loss performance, which means they aren't having an effect on how much the companies are making or how many people are employed. And only two of eight major sectors are actually showing meaningful use of AI. But here's the craziest thing. Is the big companies, the ones that have the money to implement these types of tools, well, they're leading and piloting the projects, but they're very rarely implementing and scaling them up. As you can see quite clearly from this chart, it's media and telecom and professional services that are having the biggest increase. But most companies aren't using these at all, including energy and materials and advanced industries, which by the way, is where manufacturing would typically take place. So the question is where are the manufacturing jobs going? Were they really offshore to other countries? Well, yes, partially, but there's more to the story than that. And the real question here is whether or not it even makes sense to invest in bringing them back. And The Economist recently did an amazing breakdown of this. America's government is spending lavishly to revive manufacturing. And they asked the question, can an industrial renaissance make America stronger, greener, and richer? The answer here is, again, going to surprise some and probably not surprise others. The data here is unquestionable. Take, for example, car makers. They invested $68 billion in projects in 2021 and 2022 alone. This was the biggest boom in the industry in decades. Yet manufacturing jobs didn't increase as a result. And chip makers have recently announced a similar surge of investment with $200 billion being spread across 16 states to bring manufacturing home. But think about this. Does it really make sense that these investments are going to create a ton of jobs? Because think about a microchip. That isn't really something that a human can manufacture. They are so tiny and the tools that are used to make them are so specialized that it isn't the type of person that used to wrench on cars back in the 1920s that is doing this type of work. No, what these massive investments are doing is creating construction jobs for a short period of time and then creating technical management jobs that aren't going to do any favors for the 5 million people that lost their manufacturing jobs over the last 20 years. It is virtually impossible to replace those 5 million manufacturing jobs because, quite frankly, those manufacturing skills that were needed to make the things that those jobs did aren't going to be the same skills needed to make modern goods. And the reality here is manufacturing has been declining for a long time. As countries get richer, this is normal. A rising share of output routinely shifts from manufacturing to services. This happened in Great Britain and it happens in virtually every country that becomes wealthier and wealthier. Not only that, the data over decades shows when Americans lose factory jobs, well, they're typically able to find other types of work. Otherwise, why would the unemployment rate in the US be at all-time lows even though the manufacturing sector has essentially been decimated? So the real question here is not whether it makes sense to bring manufacturing jobs back home. It doesn't. And these massive investments in infrastructure for manufacturing aren't really going to make a difference in manufacturing jobs. These are the types of jobs that are going to go to well-educated people who are the very people that aren't actually supposed to be being helped based on the whole idea of bringing manufacturing back to the US. And not only that, here's the real reason why manufacturing jobs just don't exist in the US anymore. It's partially because things have been offshored. But more than that, it is because companies are becoming significantly more efficient at manufacturing things using that AI cousin I was talking about which is robots. Because when car manufacturers spend billions of dollars creating new plants and chip manufacturers spend billions of dollars creating new plants, there aren't going to be many manufacturing jobs brought back into the US because the majority of those things that are going to be manufactured are going to be done by things that aren't human. And what makes this even crazier is that even the idea of bringing that manufacturing back to the US actually makes all of those goods more expensive because the US isn't as efficient at manufacturing those goods as other countries. Which means everyone is going to pay probably significantly more for everything over the next couple of decades. So then the question is where should the US be spending its money if it's trying to create more jobs? And believe it or not, the answer is proven. It's in infrastructure. It's in construction. When the economy needs more jobs, the best thing that the government can do is not try to reinforce industries that are dying, but reinforce industries that are growing. And industries that provide services and infrastructure for the growing population for a country that is becoming wealthier and wealthier. So essentially every penny spent on bringing manufacturing back home is a penny that could be spent on promoting industries that are rapidly growing as opposed to those that are dying. So where do the manufacturing jobs go and where are they going? Many places. They're going to services. They're going to leisure and hospitality, which is the pink line at the top here. And they're going to construction. Now this doesn't mean that it's a one-for-one movement in jobs, but there are sectors of the economy where jobs are growing. And the reason that they're growing is because that those sectors have more need for employees and more money available to pay those employees. Unlike the manufacturing industry that is becoming more and more efficient and needs less and less people. But in my mind, it isn't the reduction in manufacturing jobs and the trillions being spent to bring them back home that's the real issue. The real issue is the fact that real wages in the United States have gone down significantly since 2009. On average, incomes in the U.S. used to increase by 3.1 percent per year. They now increase by about 2.3 percent when adjusted for inflation. And the majority of this adjustment has to do with inflation itself. And specifically, crazy policies like tariffs and spending trillions of dollars to try to reshore manufacturing that inevitably will increase the cost of goods for everybody. And when you combine this with an unemployment rate that is also increasing, it could have significant repercussions for the economy. It could be a market correction. It could be a recession. It could be even a full-out crash. And what's really sad is that this decrease in real wages is happening at the same time when the percentage of wealth held by the 0.01 percent of the U.S. is going back to levels not seen since the Great Depression. So while the rich are getting richer, the average person in America is getting poorer and poorer by the day. Partially because of things like reduced corporate tax rates, which by the way, are 100% correlated to the increase in wealth of the ultra-wealthy. Because of crazy policies like tariffs and reshoring that are going to increase the cost of goods for everybody. And because politicians on both sides of the aisle are lying to the public about the things that they ultimately know or ought to know are going to have devastating effects for the very people that are voting for them. So with unemployment numbers rising, there are some things that you need to make sure that you do. The first is do everything you can to make sure that your income is increasing and that your job is stable. Try to reduce your spending as much as possible so that you can increase your savings. Look for opportunities to increase your income, perhaps by finding better jobs in other industries if you're in one of those industries that's actually dying. And most importantly, the people that feel the most damage when the economy turns, which based on the unemployment numbers it looks like could be right around the corner, are those that have debt. So do everything that you can to get out of the trap that will make the most people suffer, which is having any sort of debt outside of the debt that you've used to buy your home. Oh and by the way, if you want to see what always happens before a market crash, which unemployment is one of those things that leads to it, make sure you check out this video right here.