Thursday, June 22, 2017

Last Call For Automation Nation

First Wendy's announced a pilot program already under way, now McDonald's is going to replace thousands of cashiers with automated kiosk terminals.

McDonald's shares hit an all-time high on Tuesday as Wall Street expects sales to increase from new digital ordering kiosks that will replace cashiers in 2,500 restaurants.

Cowen raised its rating on McDonald's shares to outperform from market perform because of the technology upgrades, which are slated for the fast-food chain's restaurants this year.

McDonald's shares rallied 26 percent this year through Monday compared to the S&P 500's 10 percent return.

Andrew Charles from Cowen cited plans for the restaurant chain to roll out mobile ordering across 14,000 U.S. locations by the end of 2017. The technology upgrades, part of what McDonald's calls "Experience of the Future," includes digital ordering kiosks that will be offered in 2,500 restaurants by the end of the year and table delivery.

"MCD is cultivating a digital platform through mobile ordering and Experience of the Future (EOTF), an in-store technological overhaul most conspicuous through kiosk ordering and table delivery," Charles wrote in a note to clients Tuesday. "Our analysis suggests efforts should bear fruit in 2018 with a combined 130 bps [basis points] contribution to U.S. comps [comparable sales]."

He raised his 2018 U.S. same store sales growth estimate for the fast-food chain to 3 percent from 2 percent.

The analyst raised his price target for McDonald's to $180 from $142, representing 17.5 percent upside from Monday's close. He also raised his 2018 earnings-per-share forecast to $6.87 from $6.71 versus the Wall Street consensus of $6.83.

"MCD has done a great job launching popular innovations within the context of simplifying the menu, while introducing more effective value initiatives that have recently begun to improve the brand's value perceptions," he wrote.

Of course Wall Street loves replacing several thousands of jobs with machines.  More profit!  Of course, if everyone automates, who's going to actually have money to pay for things?

Thirteen years ago, two prominent U.S. economists wrote that driverless cars couldn’t execute a left turn against oncoming traffic because too many factors were involved. Six years later, Google proved it could make fully autonomous cars, threatening the livelihoods of millions of truck and taxi drivers. Throughout much of the developed world, gainful employment is seen as almost a fundamental right. But what if, in the not-too-distant future, there won’t be enough jobs to go around? That’s what some economists think will happen as robots and artificial intelligence increasingly become capable of performing human tasks. Of course, past technological upheavals created more jobs than they destroyed. But some labor experts argue that this time could be different: Technology is replacing human brains as well as brawn.

When politicians talk about jobs, they tend to focus on iconic, goods-producing industries, such as mining, steel production and auto making, that have traditionally been the hardest hit by global competition and technological progress. Lately, though, the loss of manufacturing jobs in the U.S. pales in comparison to the much larger losses in parts of the services sector.

Overall, services accounted for three-fourths of the job losses among more than 350 sectors of the private economy in the last year. That’s a big shift from previous decades, when goods-producing categories tended to suffer the most losses.

In the U.S., for example, department stores employ 25 times more workers than coal mining companies. And as customers increasingly purchased goods via the internet, average employment in the first four months of 2017 was down 26,800 from the same period a year earlier, against just 2,800 job losses in coal.

The effect on labor markets of free-trade agreements and increased immigration has already caused significant political upheaval, as the resurgence of populism in the U.S. and Europe demonstrates. But some economists believe that the world is on the cusp of much bigger change, on the scale of the revolution brought about by industrialization in the 18th and 19th centuries. Researchers at the University of Oxford estimate that nearly half of all U.S. jobs may be at risk in the coming decades, with lower-paid occupations among the most vulnerable.

What jobs will today's kids actually have twenty years from now?  Odds are very good the answer will be "they won't have one."  Doctors, dentists, and CEOs will still be with America for decades, but any job that requires say, analysis, repetitive motion, or lots of math?  Kiss it goodbye.  Bookkeepers, actuaries, insurance underwriters, loan officers, and short-order cooks?  Not going to be a lot of those a couple decades from now.  If your job involves a computer and a phone, and you never meet face to face with anyone, I've got bad, bad news for you.

It's going to be a mess for the rest of my lifetime, and probably that of your kid's lifetime as well.

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