Employment Growth in the Travel Industry?

A few days ago, I mentioned that the travel industry has been one of the few areas (outside of government) where employment growth has been strong. I mentioned that the baby boom generation is traveling. There is more to the story.


The key other point is that package deals are being purchased. Instead of shopping for a vacation rental within a half day drive, the public is leaving the car at the airport. The reduction in total air miles flown has not been on the level of reduction in miles driven. Many travelers are buying package deals. Many destination resorts are doing much better than most individual rental properties. The employment growth is real, but, as always, the media emphasis comes after the trend has run along way. Yesterday, the New York Times published a front page article telling about how driving is making a come back.



The naive have used the article as the reason to "jump back into energy investments". Exxon just announced the biggest profits in history and the high profits make its PE multiple low. Exxon was the number one performing large cap investment over the past 35 years. It is a well run company. The left uses it and Wal-Mart as punching bags but this is mostly jealousy from those who wish they had invested. Still, the big energy boom that lasted from 1999 to 2007 has run its course.


I disagree with the many who believe we are in a commodities "super cycle". These folk see China as the largest economy in the world in just a few years and they see huge on-going demand growth for commodities. The reality is that Japan, a country that must import almost 100% of its raw materials, is on the other end of the China see-saw and the Yen, like the US dollar has turned. Shares in Japan were on fire for many years until about 20 years ago. Shares in Japan are now all the way back to the prices of 20 years ago, just as the cycle is turning. The upturn of growth in Japan will not suppress growth in China but one of the reasons that Japan will do well is its efficiency in using resources. China has the most progress to make in increasing the efficiency of its use. China, embarrassed by the smog at the Olympics, has built an assembly line to produce nuclear power plants. China is going to contribute to a dramatic reduction in the growth in digging and transporting coal.


Japan and a number of "old" EU countries and Russia combined are experiencing reductions in population. Population growth rates have fallen dramatically in many countries, including China. The worlds population growth would probably end by 2050, except for the longevity factor.


All the while, technological innovations are soaring ahead at break neck speed. Some of these innovations will dramatically prolong life, contributing to population growth, but many others will dramatically cut the per person use of the most valuable commodities. (The number one cause of death is heart disease and hearts are being "renewed" with outpatient injections. Just one example of innovations that will dramatically prolong life.)


The examples of reduced need for commodities is endless. For thousands of years, the real, inflation adjusted, price of commodities has been negative. The history of more efficient use is a several thousand years old. The stories about Joseph in Egypt are about learning how to use grow and preserve commodities. I have fussed about the foolishness of using corn oil in car engines but genetically improved elephant grass will produce 5 times the energy oils for a fraction of the costs. The next time the price of oil rises, elephant grass or some other cheap raw material will be ready to compete. We do not need an Obama boondoggle to talk the market into improving elephant grass or some other best alternative.


It is time for a backlash against big government. So far, the credit crisis has resulted in a backlash against big business. By the next, election (only 2 years away: :-)), there should be a backlash against the padded salaries of government workers.


The tide seems to be flowing in the big government direction right now but the government is broke and broken. The Bush tax cuts do not expire until 2010. To enact Obama's big spending programs, the government would have to take on even more debt. Democrats will hold significant majorities in the house and senate but they will not gut the military budget quickly and many are not in the mood to borrow and spend. The $500 tax rebate checks and the other $500 credits to be issued by the Obama plan will not do much. The decline in the household expenditures for inflated energy and food will be the much larger tax cut. The family household budget will be repaired faster than government budgets. Many state budgets are in horrible condition.


The baby boom generation will continue to travel. A significant portion of their energy savings will flow into their travel budget. The strengthening US dollar has made and will make international travel more affordable.