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01.10
Outlook
for 2010
By George F.
McClure
As in past years, this annual
survey will examine the outlook in eight areas
of significant importance to the U.S. endeavor:
technology, energy, climate change, work force,
employment benefits, immigration, infrastructure
and the economy.
The economic stimulus has had
mixed results. Only a fraction of the $787
billion in government funding to be deployed
over two years has been spent and a controversy
has arisen over how jobs saved or new jobs
created as a result of the stimulus can be
measured. Chrysler has announced termination
of research into electric cars, as Fiat assumes
control and plans to import its product line
into the United States.
But GPS and wi-fi technologies
are opening applications for cars to communicate
with remote systems and with each other. The
Zipcar short-term rental is one benefactor.
[link]
In the next six years, a quarter
of new cars delivered are expected to have a
remote telemetry capability, opening the way to
new vehicle services and protections.
[link]
Government funding ($2.4
billion) for new battery technology research and
for the next generation of plug-in hybrid
electric vehicles is expected to create
thousands of new jobs.
[link]
The Department of Energy is
offering up to $1.5 billion in grants to U.S.
based manufacturers to produce these highly
efficient batteries and their components.
The Department of Energy is
offering up to $500 million in grants to U.S.
based manufacturers to produce other components
needed for electric vehicles, such as electric
motors and other components.
The Department of Energy is
offering up to $400 million to demonstrate and
evaluate Plug-In Hybrids and other electric
infrastructure concepts -- like truck stop
charging station, electric rail, and training
for technicians to build and repair electric
vehicles.
By contributing to the reduction
of petroleum use and greenhouse gas emissions,
these projects should advance the United States'
economic recovery, national energy security, and
environmental sustainability. The announcement
advances the goal of putting one million plug-in
hybrid vehicles on the road by 2015. [link
Nanotechnology offers a way to
test composite materials for strength and
processing defects through the use of nanotubes.
The fact that they can also make the composites
more electrically conductive suits them to use
in aircraft materials to avoid lightning damage.
Porsche is using weight-saving
aluminum and an optional lithium-ion main
battery in its Boxter Spyder, available in
February. [link] The object is performance
rather than better mileage, but both can be
expected in this 2,811 pound soft-top roadster.
[link] Details on the 176 pound
weight reduction are found at
[link]
Planned for fuel economy rather
than performance is the Volkswagen L1 concept
car, a two-seater unveiled at the Frankfurt Auto
Show, capable of 158 miles per gallon.
[link]
A production model should be
available in 2013, but VW promises an early
version will be available in 2010. [link The ‘L1’ designation refers to
a goal of traveling 100 km on one liter of fuel
that translates to 235 mpg. The total vehicle
weight is 838 pounds, including a 273 pound
carbon fiber body.
“The Futurist” traces the
heritage of the L1 back to engineer and
visionary Buckminster Fuller’s Dymaxion rear
engine teardrop-shaped 3-wheel vehicle
introduced in 1932. Only three were ever built.
[link]
One was part of a wide-ranging
Buckminster Fuller exhibition at New York’s
Whitney Museum last year.
A team of MIT students won the
2009 Buckminster Fuller Challenge,
Sustainable
Personal Mobility and Mobility-on-Demand Systems
(SPM/MoD). [link]
General Motors (60 percent
government-owned) reversed plans to sell its
German Opel unit as the company realized that
the small Opel diesel engines could be an asset
for other small luxury cars, seen as the
successor to SUVs. [link]
Fossil fuel prices have remained
moderate over the past year and will respond to
increased activity as the recession ends.
Natural gas is most volatile in price. Oil has
ranged between $40 and $80 per barrel; producers
see prices of at least $80 as a good sign for
future production. Nuclear power is seen as
essential if the U.S. is to cope with increased
power demands in the future. The U.S. gets only
about 20 percent of its electric power from
nuclear plants now, compared to 77 percent in
France. Within the past year, Germany, which
derives 23 percent of its electric power from
nuclear sources, announced a plan to
decommission all nuclear power plants but then,
a few months later, withdrew that plan. Critics
pointed out that even if Germany were
nuclear-free, it would be buying
nuclear-generated power from France, Russia, and
Ukraine, but paying 40 percent more for it.
In the U.S. 20 percent of the
electric power is derived from 104 nuclear
plants, which account for only 12 percent of the
installed capacity. However, they operate more
than 90 percent of the time.
[link]
A recent development is the
award of a $20.4 billion, largely fixed-price,
contract for four 1,400 megawatt nuclear plants
by the United Arab Emirates to a Korean joint
venture, Kepco, Hyundai, and Samsung, which had
bid 30 percent less than the French Areva team
and also beat out the still higher bid of
General Electric-Hitachi. The Kepco team
includes Westinghouse and plans to have the
first plant online in 2017, with the other three
operational by 2020. The contract includes
completion of the four plants including nuclear
fuel loads. The award, serving as a pricing
benchmark, could pave the way for other
contracts for middle-eastern nuclear power
plants. Costs would be higher if the reactors’
containment vessels were engineered to withstand
a plane crash. Korea operates 20 nuclear power
plants, with 18 more under construction or
planned, but this contract marks the first
export of the technology.
The U.S. Department of Energy
will shortly make the first of $18.5 billion in
loan guarantees to build nuclear power plants,
authorized in 2005. Recipient power companies
will reimburse the government for the risk it is
assuming.
Harnessing wind power from the
central states’ wind belt requires transmission
lines to wheel the power to coastal areas where
it will be used. Resources to do this were not
decreed in either an energy bill (The
American Clean Energy and
Security Act (H.R. 2454)) or the
stimulus bill (The American Recovery and
Reinvestment Act of 2009). T. Boone Pickens’
Mesa Power company ordered $2 billion worth of
wind turbines, expecting oil prices to continue
to rise. They didn’t, and now Pickens has 267
wind turbines for sale. [link]
The use of natural gas is
expected to decline in 2010 although prices will
rise, while oil demand will increase slightly,
according to the Energy Information Agency.
More coal-fired power plants will come online,
accounting for the reduction in natural gas
consumption. Motor gasoline and diesel fuel
will both be at higher prices in 2010 ($2.81 and
$2.94/gallon respectively), accounted for by
better refiner margins. The price for home
heating oil this winter should rise slightly,
from $2.63/gallon to $2.80/gallon. [link]
The International Energy Agency
released an updated outlook in November.
[link] Sustained investment in
exploration is needed to replace existing oil
fields, almost two-thirds of the output from
which will be exhausted by 2030.
Coal is plentiful on the U. S.
market as both utilities and factory demand have
slackened. The price for benchmark Central
Appalachian coal has fallen by half in the past
year. Production is expected to be flat for the
next year, but electricity producers, who drive
most coal demand and pricing, are being watched
closely for signs the recession is abating.
The stimulus plan includes $4.5
billion for electric grid modernization and
associated worker training.
Hopes for substantive changes at
the Copenhagen summit on climate change faded
even before the emails and documents from the
East Anglia Climate Research Unit were hacked
and made available from other web sites. Some
promises for carbon emission reductions were
carried forward there, while third world
countries pushed for assistance from developed
countries in financing their efforts to clean up
their industry.
[link]
President Obama will deliver a
specific American promise: to cut greenhouse
gases by 17% from 2005 levels by 2020, by 30% by
2025, by 42% by 2030 and by a full 83% by 2050.
The Economist notes that the promised target is
no different from that already passed by the
House of Representatives, and considerably lower
than what other rich countries (especially in
Europe) have promised.
The odds of signing a
comprehensive treaty in December were
vanishingly small.
[“Copenhagen’s Inconvenient
Truth,”
[link] The G-8 industrialized
states, in 2008, endorsed a goal of cutting
emissions in half from 1990 levels, by 2050.
Compliance with emission caps
for developing countries is hard to monitor and
verify. There is no way to hold countries such
as China and India to emission caps short of
punitive trade sanctions which could run counter
to broader foreign policy.
Some employers have held off on
hiring pending clarification of costs to them
for legislation pending for cap-and-trade/carbon
tax as well as for health care reform.
Public opinion has cooled toward
major initiatives to thwart global warming.
[link]
Charges of conspiracy among
adherents of the global warming theory have
reduced their credibility among critics. [link]
It appears that data may have
been
massaged. [link]
Some have asserted that
demographic changes are much bigger threats than
climate change. (Ref. 1)
Open debate on climate change
should continue.
[link] As The Economist
notes, there are no certainties in science, not
even climate change.
[link]
The unemployment rate is at its
highest in 25 years, with job cuts for males
nearly three times the number for females. With
a national unemployment rate in November of 10.0
percent, for men it is 10.5 percent and for
women 7.9 percent. Construction and
manufacturing, predominantly male occupations,
have been hit harder than government, education
and health care, where women have the most
jobs. Increased employment will be the last
indicator of recovery, as overtime is used
instead of more hiring to increase production
before all signs point to a sustained economic
recovery.
The effects of skill-based
technological change, and other factors such as
trade, foreign direct investment, and offshoring
are shown in a workforce study done by McKinsey
Global Institute. The top 22 percent of workers
qualified for attractive jobs where demand and
incomes have been rising over the past 15 years
underscore the problem for the other workers.
The threat is greater for lower-skilled
workers. Seventy-one percent of U.S. workers
are in jobs for which there is low demand from
employers, an oversupply of workers, or both.
(Ref. 2).
The official unemployment rate
for November 2009 was 10.0 percent, down from
10.2 percent the previous month but up from 6.8
percent a year earlier. The median duration of
unemployment stood at 20.1 weeks, up from 10
weeks a year earlier.
[link]
Discouraged workers, who have
stopped looking for work, are not counted in the
official unemployment rate but are included in
the total unemployed, with all marginally
attached workers, plus total employed part time
but wanting full time employment, as a percent
of the civilian labor force. This figure was
17.2 percent in November, down from 17.5 percent
in October, but up from 12.6 percent in November
2008. Adding long-term discouraged workers, who
were dropped from the compilation in 1994, the
total unemployed is around 22 percent.
[link]
For perspective, the 2010
unemployment rate for Britain, Hungary, Sweden,
Germany, and France is projected at between 10
percent and 10.9 percent, with a few lower
(Netherlands 6.2 percent, Italy 9.4 percent),
and Poland, Ireland, and Spain higher (12
percent to 20.5 percent), according to the
Economist Intelligence Unit.
Increasingly, individuals are on
their own for retirement security, as defined
benefit pension plans are terminated or frozen
and new hires receive only defined contribution
plans. Some employers who had suspended their
401(k) matches at the depth of the recession are
restoring them – some of the “green shoots” so
eagerly awaited as signs of the recovery.
Employers trying to hold the line on
contributions to health care insurance, are
increasing the employee contributions (premiums
and co-pays) as insurers raise the employers’
premiums.
As a direct stimulus, a cut in
the payroll tax for Social Security and Medicare
has been proposed. It would have the advantage
of cutting costs for employers (who pay half the
tax) and therefore creating more jobs – maybe 3
million to 4 million more. To balance the
books, a corresponding cut in benefits could be
considered.
[link]
Not very visible, but an added
cost for employers, is the unemployment
compensation tax – which is rising steeply as
job cuts increase and unemployment benefits are
extended. In Maine by the end of 2009, the
unemployment insurance trust fund will have paid
out nearly $254 million in benefits while the
tax that fuels the trust fund will have brought
in just $83 million. Employers must participate
in the unemployment insurance system, which is
the nation’s basic safety net for workers who
lose their jobs because of changing economic
conditions. In Florida, the minimum premium
will rise in 2010 from $8.40 to $100 per
employee, in part because of failure to adjust
the premium in past years. This is happening
because more Floridians are out of work, and
because the state's unemployment compensation
trust fund is broke.
The U.S. Department of Labor has
indicated 40 states will have to borrow from the
federal government to pay unemployment benefits
in 2010 and said states already have borrowed
$20 billion to pay benefits.
[link]
Depending on how the debate on
health care reform works out, there may be
specific criteria for adequacy of health
insurance. Some self-employed workers have
found that catastrophic health insurance coupled
with a Health Savings Account (HSA) to be a good
combination. It gives the insured persons an
incentive to minimize their expenditures. But
this combination does not meet the test proposed
for adequate health insurance and could subject
the holder to a tax penalty equal to 8 percent
of payroll.
For the first time in many
years, some H-1B visas were not applied for in
the month after they became available in the new
fiscal year. There were calls for speeding up
the processing for green cards that now often
require more than five years. Part of the
processing is background checking, which is
time-consuming for people who have lived at many
different addresses during their lives.
Comprehensive immigration reform is unlikely in
2010; one effect is the treatment for illegal
aliens in the health care reform bills –
exclusions are mentioned but without any
enforcement provisions. [link]
The Center for Immigration
Studies has issued a backgrounder on the
immigration-related provisions of the health
reform bills in Congress.
[link]
Student visas have no quota, and
are good for the duration of studies in the
United States.
[link]
Non-citizen students with
critical skills may enlist in the military
(Army, Navy, Air Force) under a pilot program
that makes them eligible for citizenship. The
Military Accessions Vital to the National
Interest Program (MAVNI) is a pilot program
expiring in December 2009, but expected to be
extended. Army recruitment for MAVNI initially
occurred only in Los Angeles and New York. It
was expanded to include Atlanta, Chicago and
Dallas in September 2009. The quota is 1,000
enlistments. Details are found at [link]
After the collapse and
rebuilding of the I-35W bridge over the
Mississippi River at Minneapolis, there were
calls for accelerated reinspections and repairs
of other bridges and infrastructure such as
levees and dams. Months later 5,000 pounds of
metal parts of the San Francisco-Oakland Bay
Bridge fell to the deck, forcing closure until
repairs could be made. [link]
Amtrak alone has a $15 billion
backlog in deferred maintenance and improvements
- $5 billion in the Northeast Corridor below the
rails, and $10 billion in equipment needs,
according to Joseph H. Boardman, Amtrak
CEO/President. He has spoken about a goal to
extend electrification of the rail network from
Washington, DC, to Richmond in the next five
years, and to Atlanta or Jacksonville in the
next ten years. After the network is
electrified from Maine to Miami, the next step
is to electrify the rest of the country’s rails
used by Amtrak.
[link]
The stimulus package includes
$1.3 billion in capital grants for passenger
rail, $8 billion for high-speed rail, and $6.8
billion for capital assistance to the Federal
Transportation Administration. At the White
House Jobs Summit, foreign rail equipment
manufacturers promised to establish production
facilities in the U.S. if selected for the
high-speed rail projects.
[link]
There are proposals to shift
part of the stimulus funding to infrastructure
maintenance.
Cyber attacks on the electric
grid and the banking system are considered
viable threats. One such attack was suspected
as the cause of an electric outage in Brazil in
November, lasting four hours, cutting off power
to central and southern cities for some 70
million people, including in Rio de Janeiro and
Sao Paulo.
[link] Servers for a hydroelectric dam
that went offline during the incident had been
found earlier to have been “visited” by
outsiders.
With the widespread use of
remote process control systems, such as SCADA
(Supervisory Control and Data Acquisition),
attention has turned to protecting them from
intrusions when connected via the Internet.
[link]
Wideband Internet access for all
remains a goal, but the U.S. is not the leader
here. While U.S. customers use 384-kbps or
3-Mbps links, customers in Korea, China or Japan
are using 40- to 100 Mbps links. An issue is
net neutrality, with the same delivery speed for
all data packets, but as limits on bandwidth are
reached, there is a move to Deep Packet
Inspection – looking into a packet to identify
its payload, so that ones requiring near-realtime
delivery can get it (e.g., for video or voice),
perhaps for a premium price. [link]
A breakdown of the spending
planned under the stimulus bill is found at
[link]
Main factors in recovery:
Revolving consumer credit was
reported by the Federal Reserve to have been
paid down by an annual rate of 13.1 percent in
August to $900 billion. Non-revolving credit
debt, such as auto loans and student loans,
dropped slightly by an annual rate of 1.6
percent to about $1.56 trillion. The personal
savings rate climbed to 4.2 percent in July.
All good signs, but higher personal savings
means lower consumption spending, thus delaying
economic recovery.
[link]
The main factor affecting
consumer spending is consumer confidence. The
Conference Board reported the November consumer
confidence survey was up slightly over October,
but still lower than it had been in May.
[link]
The S&P/Case-Shiller U.S.
National Home Price Index shows improvement for
each quarter reported in 2009, with lessening
negative returns. [link] Available housing, by price,
ranges from a 2 month supply to over 40 months.
[link]
The tax credit incentive for
first time home buyers has been continued to
April 30, 2010. A new wrinkle is the $6,500
credit for previous home owners who meet
eligibility criteria.
[link]
Manufacturing indices are up for
several months. In the October report, the
Purchasing Managers’ Index is up for the third
month, 3.1 percentage points; the New Orders
Index is up for the fourth month, but off 2.3
percentage points; and the Production Index is
up for the fifth month, up 7.6 percentage
points.
[link]
A second stimulus package is
proposed by some, but lacking firm evidence that
the first one created jobs in the private sector
there will be little enthusiasm for taking on
the added debt that would be needed for another
stimulus.
The Congressional Budget Office
estimated the effect of the 2009 stimulus (ARRA)
on third quarter GDP. The midpoint of its
estimate range is that the stimulus added 2.2%
to quarterly GDP or about $80 billion. [link]
If the economic recovery is not
well underway by the end of 2010 when the Bush
tax cuts on income, dividends, and capital gains
expire, it may suffer a setback. There is also
talk of a surtax to fund the war in Afghanistan.
As noted earlier, an increase in
employment will be the last indication that the
recession is behind us.
The CBO issued a forecast early
in 2009 that predicted economic recovery in
2010, but the extent of increase in unemployment
was greater than forecast then – 10 percent in
2009 versus a forecast peak of 9 percent by the
CBO early in 2010. [link]
We may be looking at a weak
long-term economic recovery after a brisk
start. The Economist suggests a cycle that
resembles not a V, U, or W, as much as an
upside-down square root symbol. In the 1970s we
had a decade-long period of stagflation with a
“misery index’ – the sum of the unemployment
rate plus Consumer Price Index (as a proxy for
inflation) percentages. The calculation has
been updated and coined the Real Misery Index.
[link] The numbers reflect the July
date: The U6 figure for November 2009, as noted
above, is 17.2.
References
1. Mark Steyn, America
Alone: The end of the world as we know it,
Washington, DC, Regnery Publishing, 2006.
Drastic declines in birth rates will depopulate
Europe and Japan over the next 30 to 50 years.
This will be offset in Europe by Muslim
immigration and high birth rates for resident
Muslims, changing the culture of that
continent. France is almost ten percent
Muslim. For those age 20 and younger, about 30
percent; and in major urban centers, about 45
percent. [link], Rotterdam is 40 percent
Muslim. Swiss voters are banning the
construction of new minarets.
[link]
The French identity is in
jeopardy.
[link]
Total fertility rates for 223
countries and territories are found
here. The replacement rate is 2.1
births per female, exceeded by 120 localities.
Countries with low median
population ages face a problem in education and
employment for their young citizens.
Afghanistan’s median age is 17.6, Iraq’s is
20.4. For Pakistan it is 20.8 years, for
Somalia 17.5 years, and Yemen 16.8 years.
[link]
Russia is a special case,
according to Steyn. Lifespan is shrinking as is
the population. A Russian male born in 2000 has
a life expectancy of 58.9 years. From a peak
population of 148 million in 1992, Russia will
be below 130 million by 2015, perhaps down to 50
million or 60 million by the end of the
century. With one of the lowest fertility rates
in the world, 1.2 children per woman, and a high
abortion rate, Russia is a prospect for
take-over by high-birth-rate Muslims.
In November Chechen separatists
claimed responsibility for a bombing of a luxury
train in Russia that killed 26 and injured 87.
They support a militant leader who wants to
establish an Islamic state in Chechnya, a Muslim
region in the Caucasus.
[link]
Turkey, the only Muslim member
of NATO, does not want to send combat troops to
fight the Taliban, as requested by President
Obama, but will assist in other ways. [link]
2. “Changing the fortunes of
America’s workforce: A human capital challenge,”
McKinsey Global Institute, June 2009
[link]
The report analyzed workers in
nine categories for income dispersion. Found
the top two doing well, middle two showing a
positive compound annual growth rate in wages
over a full business cycle (1994-2005), while
job prospects for the bottom four were affected
by trade, foreign direct investment and
offshoring (TFO). Of the workforce, 13.2
percent are in the category “automated away,”
where workers can be easily displaced. The top
two categories and front line service workers
are positively affected by skill-based
technological change, where education and
training to keep up makes them more valuable.
The investment for each such worker in 2003 was
$4320 on average. Non-routine interactive and
analytic tasks are rewarded, while routine
manual and non-manual ones as well as routine
cognitive tasks show a less valuable diverging
pattern. [Exhibit 24] Only 22 percent of
workers qualified for jobs in growth industries
and occupations, with growing demand and
incomes. For the other workers, unless new
skills are developed over the next ten years,
the divergence gap in incomes will persist and
likely grow.
George F. McClure is
Technology Policy editor for IEEE-USA
Today’s Engineer and the IEEE Vehicular
Technology Society's representative to
IEEE-USA's Committee on Transportation and
Aerospace policy.
Comments may be submitted to
todaysengineer@ieee.org.
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