Posted on 10/16/2003 6:30:43 AM PDT by Starwind
US industrial production rose 0.4 pct in Sept Thursday October 16, 9:17 am ET
WASHINGTON, Oct 16 (Reuters) - U.S. industrial production rose in September, the Federal Reserve said on Thursday, as factory output posted its biggest gain since early 2000.
The Fed said production increased 0.4 percent after a revised 0.1 percent decline in August. Firms operated at 74.7 percent of full capacity in September, their fastest pace since March. The numbers were close to Wall Street expectations.
In a sign that the troubled U.S. manufacturing sector remains on the mend, factory production -- which makes up more than four-fifths of total industrial output -- rose by 0.7 percent, the largest gain since April 2000. Much of that jump could be traced to a hefty 6.6 percent increase in auto and parts production.
=DJ Table Of Data On US Industrial Production
.
SEP AUG JUL SEP '02
TO SEP '03
Industrial Production Index 110.6 110.2 110.2
Monthly Percent Changes
Industrial Prod. Index 0.4 -0.1 0.8 -0.6
Indus Prod. Ex-High Tech 0.3 -0.2 0.7 -1.4
Manufacturing 0.7 -0.3 0.5 -0.6
Consumer Durables 3.5 -1.2 2.2 3.5
Consumer Nondurables -0.3 -0.2 0.2 -1.8
Business Equipment 0.4 0.7 0.3 0.1
Materials 0.4 -0.1 1.1 -0.6
Utilities -2.2 1.8 3.5 -1.9
Mining 0.0 0.4 0.0 1.8
(Changes are increases unless preceded by minus sign.)
(MORE) Dow Jones Newswires
10-16-03 0915ET- - 09 15 AM EDT 10-16-03
=DJ Table Of Data On US Capacity Utilization
.
Percent of capacity in use
SEP AUG JUL JUN
Total Industry 74.7 74.5 74.6 74.1
Manufacturing 73.1 72.7 72.9 72.6
Durables 69.7 68.9 69.1 68.4
Primary Metals 71.5 71.8 73.1 72.1
Motor Vehicles & Part 82.8 77.9 79.7 77.5
Nondurables 76.7 76.6 77.0 76.8
Paper and Products 83.2 82.7 83.8 83.1
Chemicals and Product 74.4 74.3 74.3 73.9
Petroleum Products 88.0 88.4 87.0 86.6
Mining 84.9 85.0 84.7 84.7
Utilities 82.4 84.5 83.4 80.8
Stage Of Process Groups
Crude 82.6 82.6 82.9 82.4
Primary and Semifinished 76.6 76.6 76.5 75.8
Finished 70.9 70.3 70.6 70.4
(END) Dow Jones Newswires
10-16-03 0915ET- - 09 15 AM EDT 10-16-03
More impressive is a little strip mall restaurant opened three years ago by Mexican immigrants, run by the family. In less than three years, they have opened three more restaurants, despite a new Quiznos going in right next to them.
Now, these are "service" jobs, for the most part, but someone had to build these facilities; someone supplied computers and hardware and equipment; someone manages them; and so on. I see definite signs of an increasingly strong recovery.
someone had to build these facilities;and so on. I see definite signs of an increasingly strong recovery.Yes, construction - mostly residential, some commercial - is up
someone supplied computers and hardware and equipment;
Yes, but most assembly, chip fab, chip equip, etc is offshore
someone manages them;
as is the programming, etc. What remains is so far temp employment growth of late.
This is a discussion that ought take place on at least two levels.
1) near-terms signs & trends and causes which are monetary pumping and tax cuts which are short-lived as the rebates are spent and re-fi's subsideI don't believe any thoughtful person ever said the stimulus would not produce a rise in the markets or GDP. Rather the issue has been is it sustainable, genuine (vs a statistical aberation), and do other GDPs benefit more than the US does.2) long-term fundamentals which are the debt, the growing deficit (exacerbated by the clothing, new furniture, appliances, cars etc. paid for with rebates & re-fi cash that went into the GDP's of other countries) and the world over-capacity of manufacturing and labor.
Keep in mind for roughly every 5 dollars of debt the US takes on, only 1 dollar finds it's way into the US GDP, the rest goes offshore. The major companies on the stock exchange are multi-nationals - a large part of their 'profit' comes from exchange rates and business outside the US and increasingly their operations are likewise not reliant on the US - ie, their stocks can appreciate (either on hype or fundamentals) while the US economy stagnates.
I don't ignore it. I don't agree it is a genuine factor. It is a statistical aberation.
See Is Rising Productivity Resulting In Job Losses Or Vice Versa?
By the way, this is nothing new in American history. Ever since the 1600s, we have had land abundance, leading to labor scarcity, which, ironically, has led to never-ending cycles of business investing in machinery which, temporarily, has led to unemployment, followed by growth. I can't think of one period in American business history where the cycle of higher productivity did not lead to an employment boom---albeit delayed. But in no cases, that I can recall, was this accompanied by falling wages. Quite the contrary, the new, higher-tech machinery always results in higher wages.
Real wages are falling. No I'm not in favor of it, but I don't see that it's avoidable.
You've not addressed his main point (or mine on that thread and the other thread I referenced therein) that the rising productivity is the effect (not the cause) of laying off less productive workers, or of offshoring less productive businesses as I argued.
We can debate the substance of an employment boom in the US and it's accompanying wages when that happens.
That would be true if the productivity were higher because (primarily) of improved efficiency. But the point made by Kasriel and myself is that the productivity is not due to increased efficiency, but simply no longer counting in the statistic, less-productive people (because they've been laid off) or industries (because they've been offshored).
Further, though not discussed by Kasriel, is that while short-term productivty gains can appear (due to people worker harder and longer unreported hours) is that long-term efficiency-based productivity growth is the result of capital investment in new plants, equipment, processes, etc. These new investments are increasingly made in other countries.
Yes, investment in new plant and equipment is necessary.
This is the point you keep reversing (that productivity has increased first and that increase causes layoffs second) and appealing to history for proof. This is also the assumption made by the media and the 'explanation' put forward by Greenspan for several years. From Kasriel's article:
However, falling employment will result in rising productivity as profit-maximizing firms move back along their marginal and average productivity curves. In sum, it is theoretically possible that layoffs are resulting in rising observed productivity rather than rising productivity resulting in layoffs.Re-read Kasriel's article. Ignore who he is. It isn't important. He lays out classic economic theory for marginal productivity of labor with demand/supply curves and then shows the application of classic theory to the current economy - that lesser productive people have been laid off (or operations shipped offshore) first, which inturn results in a statistically higher productivity as the effect - not cause.
If you wish to discuss Kasriel's article, perhaps you'll reply there, so we don't sidetrack this thread.
You're ignoring the harder work of understanding the theory and the data, while simultaneously ignoring the current reality that non-durable & durable manufacturing, call centers, IT operations, etc (largely labor-intensive and lower productivity jobs) are being eliminated from the US economy, which elimination statistically drives up the productivity of the remaining US workforce.
Companies maximize profit all the time by dropping the least productive endeavors, or in the case of offshoring, moving them to countries where the labor is cheaper - with the same result on domestic productivity - it rises.
You needn't study history to understand that. Instead, study business operations.
When historically have global corporations offshored and outsourced manufacturing, IT, Engr, etc to India, China, Mexico? When historically has there been trained workforces in India, China, Mexico to receive them? When historcially has China been open to investment? When historically has an internet allowed IT, software, and back office operations to move offshore and be managed onshore? When historically has manufacturing and IT had a global over supply of capacity? When historically has the US been $7T in debt (on the books) with twin ongoing and rising deficits of $500B each? When historically has the Federal Reserve striven to create inflation, raising the cost of living, food, shelter, transportation, etc for domestic workers so much it prices them out of global markets?
What 'history' exactly do you expect to find?
Again, though, you appear to be dodging this. I'm asking for some historical examples of higher productivity NOT being followed by temporary layoffs, then that being followed by increased employment.
Trained in IT, Engr, US accounting, chip and wafer fab... Come on LS, these technolgies aren't more than 25 years old, (save maybe the math used) let alone offshore outsourcing of them.
But I'm not going to waste time persuading you that IT, the internet, etc are recent innovations and hence trained foreign workforces therein are likewise recent, or that outsourcing/offshoring to these newly trained workforces and foreign markets are also recent. My point was there aren't any 'apples-to-apples' historical comparisions to seek.
I'm asking for some historical examples of higher productivity NOT being followed by temporary layoffs, then that being followed by increased employment.
For one obvious example, pretty much the entire history of agriculture (farming) is one of increasing productivity which has never been followed by increasing employment of farmers and ag-related workers (not counting the manufacture of farm equipment and construction of food processing plants). But that makes neither your point nor mine, and I not even sure that was the question you intended to ask.
My point which you persist in ignoring (which I'll not repeat further as I no longer believe you're sincerely trying to understand, but simply being argumentative) is that being your starting premise of 'higher productivty' is false and your refusal to examine that premise.
As for Singer, he was indeed the "IT" of the day.
Yes. And if in his day (1850-ish) the sewing machine industry employed 2.7M people whose jobs were offshored to China (in 1850-ish) and IT and an internet existed to manage global supply chains... you might have a point.
But you don't.
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