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Unreported productivity gains resulting in less job creation

|Includes: Dollar Tree, Inc. (DLTR), FDX, MCD, TJX

Pollsters, as with economists, often get the stats right based on the numbers they use. The danger, of course, is in using the wrong numbers. The classic pollster case was by Gallup in 1936 when they predicted Alf Landon would trounce FDR. They had the stats right, just the numbers were wrong because they polled by phone. Many fewer Democrats had phones then Republicans. When you backed that bias out, as was done after the fact, the numbers showed FDR would win as he did.

Economists have worked to do a very good job on jobless numbers. Politics required them to exclude the discouraged group to make things look better-not their fault. There is an elephant in the living room though: unreported productivity largely because it is hard to account for.

Economists have worked to "include" improvements to adjust for inflation rises (an AC is an improvement so the car didn't just cost "more" -- you got more), but the subtle ones for business are harder to figure out.

For example, EZ pass toll taking saves government 28% on costs; iPhones are substitutes for watches, alarm clocks, and physical calendars, among other things. eBooks let you read a book for 20% of the cost of most hardcovers. You wait in line for a shorter period because of faster credit card transactions than cash, as McDonalds has seen.

Now on the other side of this: the employee side. EZ Pass states need fewer employees, managers, and need to pick up fewer quarters (ever tried to lift a bag of quarters?), and a lot less labor is required. Buy online and less is involved; if you are Amazon, and have the goods shipped from the supplier's warehouse, no labor is involved. Call centers are better, more effective, and have less labor with email and website support not involving humans.

Then we have the longer life of cars, PCs, printers, and a host of other products--all leading to less labor required, especially managers and offices.

And the trend is accelerating as progressive companies are abandoning legacy paperwork (best example is the PO; if a company issues one, they don't need an invoice, unless they want their employees playing the matching game; when the goods are picked up, and received remotely, that payment can be generated to the supplier without another piece of paper; when freight is to be picked up, they have the suppliers email them--when, where--with the preset payment terms, how many pallets--the POs already describe everything else).

What happens here? The progressive retailer has the goods picked up, received by the trucker, with no need for "receiving" at the warehouses--just delivery.

PDFs replace Fedex or mail; on many occasions physical trips. 1099 stay at home work is far easier with Internet communication back and forth, eliminating the need for offices, managers, and related staff.

Expect more of this as top managers wise up.

The biggest risk is in emerging companies where most job growth comes: they will hire more people, but not proportionally what they did in the past because they will have learned how to reduce legacy expense.

What is an investor to do? Listen for the signs of paperwork simplicity; the two best in my experience are Dollar Tree and TJ Maxx; DLTR reportedly cut their accounting staff by over 65% by doing this, avoided having to move to larger facilities and more. Look for new companies that focus on avoiding the legacy investments in offices, non-tech administration so they can focus on their core activities--making and selling something, whether it be services or products.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.