Homing in on the cause of American job losses

The Arizona Republic ^ | August 31, 2003 | Jon Talton

[Willie Green]

Americans celebrate an uneasy Labor Day. More than 2.7 million jobs have been lost since 2001, the majority in well-paying fields, especially manufacturing.

Months of "recovery" have failed to create many new jobs. Millions more Americans have stopped actively looking for work. Or they are underemployed, frustrated that their investment in college or technical training hasn't improved prospects.

[George Frm Br00klyn Park]

As with energy policy and tax cuts, one can be suspicious that the Bush administration is running an insider's game where the rich and connected win at the expense of working stiffs.

Guys,And currently NON-working stiffs. Peace and love, George.

[Rokke]

How ironic that the thread immediately preceeding this one explains very clearly why this article is a piece of crap.

[Last Dakotan]

I run a manufacturing firm, and the very LAST thing I will do is hire more people. If someone had told me earlier in my career that in return for giving people a livelihood, they will lie, cheat, and steal from you at every opportunity I would have chosen something else.
Right now I'll spend my time and money automating processes.

[Grampa Dave]

Do you mean this thread?

Rebuttal for Willie Green's Latest Chroning Whining from Senior Fellow at the Cato Institute:

http://www.freerepublic.com/focus/f-news/973658/posts

The Washington Times ^ | August 31, 2003 | Alan Reynolds

Manufacturing myths By Alan Reynolds

Back in 1995, right in the middle of a nine-year economic boom, Louis Uchitelle co-authored an absurdly downbeat series of New York Times articles on "The Downsizing of America." That series was full of opinion polls, as though popular illusions could substitute for facts. More recently, there has been hope that scandals at the New York Times might have given new editors at least a casual interest in factual accuracy. Apparently not. A couple of weeks ago, the unrepentant Mr. Uchitelle wrote yet another weirdly apocalyptic piece claiming, that "manufacturing is slowly disappearing in the United States."

If you were hoping for some proof this time, be prepared to be disappointed again. Mr. Uchitelle says, "Manufacturing's share of real gross domestic product... has dropped to between 16 and 17 percent, from 18 to 19 percent in the 1950s.... The downward trends are alarming." Similar statistical exercises recently led to an interesting debate between my old friends Bruce Bartlett and Paul Craig Roberts. Yet the National Association of Manufacturers' Web site shows that "manufacturing's share of the U.S. economy, as measured by real GDP, has been stable since the late 1940s.... The overall share remains the same over the business cycle."

It is impressive for any private activity to maintain a stable share of GDP, since government spending has risen from about 20 percent of GDP in the early 1950s to 30 percent since the 1980s. Manufacturing does not need protection from foreign countries; it needs protection from domestic governments.

Mr. Uchitelle claims "the essence of a great world power is its edge in producing not services but manufactured products." By that standard, the two greatest world powers are Turkmenistan (with 39.8 percent of GDP attributed to manufacturing in 2000) and Cuba (at 37.2 percent). In China, services have risen from 21.4 percent in 1980 to 33.7 percent by 2002. In Hong Kong, manufacturing declined from 22.4 percent of the economy in 1980 to 5.2 percent in 2001.

Mr. Uchitelle claims "the shrinking manufacturing sector is again a source of public agitation, this time because so many American manufacturers are decamping to China and India." Don't editors check the facts? Direct U.S. investment in other countries was worth more than $1.5 trillion last year, according to the July Survey of Current Business. Europe accounts for 52.3 percent of American investment abroad, Mexico for 3.8 percent and China for seven-tenths of 1 percent. Any decamping to India is statistically invisible.

It helps to keep in mind a few simple points. First, manufacturing is extremely cyclical. The manufacturing component of the U.S. industrial production index fell by 5.5 percent a year in 1974-75, then rose by 6.6 percent a year for the next four years. In 1980-82, manufacturing fell by 3.1 percent annually for three years, then rose by 4.8 percent a year for six years. Manufacturing then dropped 2 percent in 1991. What happened next?

While Mr. Uchitelle first began whining about manufacturing being "downsized," it actually grew by 5.3 percent a year from 1992 through 2000. Manufacturing then fell 4.1 percent in 2001 (the bottom of his "trend") but rose at a 6.1 percent pace during the first three quarters of last year. What has been unusual about U.S. manufacturing was not the inevitable recession in 2001 but the unusually long and strong expansion for the preceding eight years. About half of the unusually strong gains came from the manufacture of high-tech equipment, which is a lot more valuable than T-shirts.

The cyclical ups and downs of manufacturing are international, by the way, not national. Manufacturing started falling in August 2000 in Japan and Korea, followed by the United States a month later. When manufacturing falls, so do imports.

Increases in productivity from improved machinery and skills are the reason manufacturing employment falls most of the time, as it does in farming, even when output is growing briskly. From 1990 to 2000, manufacturing employment fell by 0.4 percent a year in the U.S., by 1.8 percent a year in Japan and by 2.5 percent a year in Germany.

Efforts to stir up "public agitation" about China are based on lies. China accounts for only 18 percent of our imports of merchandise. Chinese imports seem bigger because they are concentrated in clothing and consumer goods, which are far more visible than more costly industrial supplies and equipment. Apparel accounts for only about 6 percent of U.S. imports, industrial supplies and equipment for 55 percent. Major industrial countries supply almost 48 percent of U.S. imports of manufactured goods, while all newly industrialized Asian countries account for 9.3 percent.

The level of value-added per Chinese worker in 1999 was only 8 percent of U.S. productivity, according to the International Labor Organization. It takes a dozen Chinese manufacturing workers to match one American. The ILO says real wages in Chinese manufacturing industries rose 80 percent from 1990 to 1999, or 8.9 percent a year. Roughly comparable figures for productivity show slower gains of 6.8 percent. That means Chinese unit labor costs are rising much faster than in the United States — a trend that ultimately caused a loss of 15 percent of South Korean manufacturing jobs in the 1990s (when U.S. manufacturers shed only 3 percent).

Unfortunately, it looks as though indefensible assertions about the supposed long-term disappearance of U.S. manufacturing are going to become a familiar political complaint over the coming year (as well as a promising source of special interest campaign funds). This rerun of the old "downsizing" story will again bore us with many more efforts by bumbling business writers and their slumbering editors to trump up some sort of "public agitation." If the rhetoric gets too annoying, ask the authors for a few facts. They just hate that.

Alan Reynolds is a senior fellow with the Cato Institute.

---

A Senior Fellow with the Cato Institutute sure beats the hell out of some lame left wing liberal pansy so called journalist trying to dis President Bush via the lost jobs bs.

[Capt. Tom]

A rising world economy is less receptive to terrorists and rogue states.

Terrorists are not a product of the economy. The multi-multi millionaire Osama Bin Laden and the 19 well off suicide plane hijackers proved that on 9-11.

Doing what God(Allah) wants done is the motivation for Islamic terrorism, and it is not going to be detered by amassing wealth on this earth where rust and moths can consume it.- Tom.

[AEMILIUS PAULUS]

Statement: "Homing in on the cause of American job losses"

Response: Now, Now, Now! We belong to the world. There is no room for narrow nationalism. Cosmopolitanism is the watchword. I will freely sacrifice my home and family for "The World Economy!" The thought of an employed Hindu and/or Chinaman increases my heart and respiration rate. Upon increased introspection I may have detected an erotic component to my current free trade beliefs.This aspect will require further self analysis.

[stylin19a]

I trust guys who have lost a jobs turning a screw or pounded a nail or worked a lathe more than I trust a guy from the Cato institute.

We saw this same lost jobs scenario in the textile industry....does anyone think the same scenario with manufacturing will produce different reulsts?

The Alan Reynolds article picks and chooses the numbers he uses.

"....China accounts for only 18 percent of our imports of merchandise.

What does this have to do with lost jobs ?

Chinese imports seem bigger because they are concentrated in clothing and consumer goods, which are far more visible than more costly industrial supplies and equipment.

This deals with finished goods...no mention of components ( I'll get to that in a minute)

Major industrial countries supply almost 48 percent of U.S. imports of manufactured goods, while all newly industrialized Asian countries account for 9.3 percent.

No mention of how much of the 48% imported from major industrial nations, have components made in China/Malaysia/Tawain etc...

Components are the widgets that are no longer being made here.

This guy makes this point: Don't editors check the facts? Direct U.S. investment in other countries was worth more than $1.5 trillion last year, according to the July Survey of Current Business. Europe accounts for 52.3 percent of American investment abroad, Mexico for 3.8 percent and China for seven-tenths of 1 percent. Any decamping to India is statistically invisible.

So I invest in a Europe.... Europeon firms don't use Chinese components?

Don't get me started on how Reynolds picks and chooses his wage increase statistics.

[VU4G10]

POLL: Do you think guest workers should be allowed residency in the United States?

http://www.azstarnet.com/border/

[Grampa Dave]

There are thousands of well made America products on the market and as product leaders.

These global remarks of America not making good products is nothing but libel against the good manufacturers of products and the good Americans who make those products.

For example I fly fish. Every reel, rod, line and leader that I have bought over the past decade with the exception of two UK reels have been American made. My rain jackets are American made with American Gore Tex liners. My waders and wading boots are American made. Even my wading staff is American made. Between my son and I, we own 5 boats or prams or special fly fishing boat like critters. All of them are American made, so are the anchors, oars, depth finders, trailers and electric motors. Both gas engines are Japanese as we don't feel that America boat motors stand up as well.

Last year on Free Republic we made up a list of wonderful American made products. The list was very long and had great products.

However, the constant crapola about every job going overseas would lead many to think that nothing good is made in America. Again that is wrong and an outright lie.

Besides the unfortunate ones without jobs, most of this crapola comes from third party whiners who can't win elections based on positive aspects of their candidates. So they waste everyone's time on Free Republic moaning and groaning.

[WilliamofCarmichael]

Yet the National Association of Manufacturers' Web site shows that "manufacturing's share of the U.S. economy, as measured by real GDP, has been stable since the late 1940s.... The overall share remains the same over the business cycle."

I could not find the quote on a NAM site but http://www.vpmep.org/mfgstats.htm has a 1997 NAM chart showing the figures through 1995 and contianing the quote.

"Manufacturing's share of the U.S. economy, as measured by real Gross Domestic Product (GDP*), has been stable since the late 1940s. During this time, the ratio of manufactured output to GDP has primarily been between 20 percent and 23 percent. During expansions, manufacturing grows more rapidly than GDP; during recessions, it contracts more rapidly. The overall share remains the same over the business cycle."

Meanwhile manufacturing jobs have declined for more than four straight years quarter after quarter. But productivity has risen. I do not know the offset and I do not know if productivity includes cheaper components manufactured offshore and imported. I do know that increased manufacturing drags imports up along with it as components are imported for assembly.

This rerun of the old "downsizing" story will again bore us with many more efforts by bumbling business writers and their slumbering editors to trump up some sort of "public agitation." If the rhetoric gets too annoying, ask the authors for a few facts. They just hate that.

Cute. IMO, cuteness is a sure sign of spinning.

BTW, I'm for the President. There's more to this than "dis-ing" him by having opinions. The President could do something about the ILLEGAL aliens, however.

[StatesEnemy]

Ohh puleeeazze!

The fvckin' Cato institute is just one of the many mouthpieces for the World's Hyper-capitalists - who have no QUALMS or COMPUNCTIONS with hurting Americans if it increases the bottom line.

[stylin19a]

I don't think anyone is questioning the quality of goods manufactured in the U.S.

And it has nothing to do with whether we make it better or not.

It's about who can make it the cheapest and that is where the jobs are going.

I also don't think any of your fly fishing stuff is being sold in China.

I am questioning those that think the number of things being manufactured in the U.S. is the same today as it was yesterday. One only has to look at the jobs that went to Mexicican border towns under Nafta (now being rerouted to China) to see it's not the same.

Don't take my word for it, try from this source:

U.S. Department of Commerce Source: Bureau of Labor Statistics

"From 1994 to 2000, the growth in the trade deficit cost 3 million actual and potential jobs, most in manufacturing.

Since April 1998, 2.4 million good-paying jobs in manufacturing have disappeared, accounting for 90 percent of jobs lost since the recession began. Unionized positions, which in 1981 made up some 27 percent of all manufacturing jobs, shrank to 15 percent by 2001."

[sixmil]

One thing that is clear to me now is that it does not matter which party is in power. If there is a problem, it is denied. When it can no longer be denied, then it's just not their fault. Never any accountability or progress, just duck, dodge, and move.

[Starwind]

    It helps to keep in mind a few simple points. First, manufacturing is extremely cyclical. The manufacturing component of the U.S. industrial production index fell by 5.5 percent a year in 1974-75, then rose by 6.6 percent a year for the next four years. In 1980-82, manufacturing fell by 3.1 percent annually for three years, then rose by 4.8 percent a year for six years. Manufacturing then dropped 2 percent in 1991. What happened next?

    While Mr. Uchitelle first began whining about manufacturing being "downsized," it actually grew by 5.3 percent a year from 1992 through 2000. Manufacturing then fell 4.1 percent in 2001 (the bottom of his "trend") but rose at a 6.1 percent pace during the first three quarters of last year. What has been unusual about U.S. manufacturing was not the inevitable recession in 2001 but the unusually long and strong expansion for the preceding eight years. About half of the unusually strong gains came from the manufacture of high-tech equipment, which is a lot more valuable than T-shirts.

Unfortunately Mr. Reynolds does not cite where he gets his index data so it is not possible to demonstrate what is wrong with it, other than it does not reflect what the Dept of Commerce BEA data shows, which is that manufacturing has declined some 27% by dollar volume over the last 15 years. We all know many companies have moved offshore and taken jobs with them. While Manufacturing has improved slightly over the last 2 months, clearly it by no means makes up for its losses over the last 15 years.

Mr. Reynolds argues "About half of the unusually strong gains came from the manufacture of high-tech equipment, which is a lot more valuable than T-shirts." Well, I've shown below the electronics equipment contribution to manufacturing, and while it is a contribution, it by no means makes up half, nor has manufacturing had strong gains.

Here is the Dept of Commerce BEA data from which most analysts, companies and economists get their data. Unlike Mr. Reynolds who has not 'shown hs work', I've provided links and tables so you can verify for yourself.

From GDP by Industry in Current Dollars As a Percentage of GDP: at http://www.bea.doc.gov/bea/dn2/gposhr.htm:

I have extracted the manufacturing share of GDP for 1987 through 2001, along with the electronic equipment portion of manufacturing:

Line                                                      1987     1988     1989     1990     1991     1992     1993 
 1        Gross domestic product......................... 100.0    100.0    100.0    100.0    100.0    100.0    100.0                                                                                                                                                                                                                                                    
12      Manufacturing....................................  18.7     19.2     18.5     17.9     17.4     17.1     17.0 
20          Electronic and other electric equipment......   1.8      1.9      1.9      1.8      1.9      1.7      1.8  
 
 
Line                                                      1994     1995     1996     1997     1998     1999     2000     2001
 1        Gross domestic product......................... 100.0    100.0    100.0    100.0    100.0    100.0    100.0    100.0                                                                                                          
12      Manufacturing....................................  17.3     17.4     16.8     16.6     16.3     16.0     15.5     14.1
20          Electronic and other electric equipment......   2.0      2.0      2.0      2.0      1.8      1.7      1.6      1.4

For all of manufacturing, for 1988 through 2001 there has been a decline of 27% (I trust no one will argue 2002 data, when published, will make up for those losses).

26.56 percent = 19.2 - 14.1 / 19.2 x 100

Sometimes the BEA's Real GDP chained data is used in similar calculations. These calculations are invalid because of how chained data is produced and tabulated. Here is the BEA's warnining note on such calculations.

Note.--Chained (1996) dollar series are calculated as the product of the chain-type quantity index and the 1996 current-dollar value of the corresponding series, divided by 100. Because the formula for the chain-type quantity indexes uses weights of more than one period, the corresponding chained-dollar estimates are usually not additive.

That note comes from the BEA's Real Gross Domestic Product by Industry in Chained (1996) Dollars in which the aggregates in a chained dollar series are not additive, which means that the components don't add up to the total GDP, which means that each component is not represented in its proper proportion or share of the total GDP, which ultimately means one can not compute manufacturing's percent of 2001 GDP as:

16.2 ~ 16.17 = 1,490.3 (from col 2001 line 12) / 9,214.5 (from col 2001 line 1)

That math, normally valid, is invalid with chained data. That's why the BEA provides tables with GDP share computed such as Gross Domestic Product by Industry in Current Dollars As a Percentage of Gross Domestic Product

Manufacturing's decline is about 27% from 1988 to 2001.

Mr. Reynolds also argues "Efforts to stir up "public agitation" about China are based on lies. China accounts for only 18 percent of our imports of merchandise. Chinese imports seem bigger because they are concentrated in clothing and consumer goods, which are far more visible than more costly industrial supplies and equipment." Again, he cites no tables or reports on which he bases his conclusion. Below are the Trade Departments data on our top 10 trading partners and the 3 largets by volume Canada, Mexico, and China, and the three largest by deficit, China, Canada, and Mexico.

For the 1st half or 2003 thru June, our 1st largest deficit is $53B with China, averaging $10B/month, on the 3rd largest volume of $79B: For June alone, see the U.S. INTERNATIONAL TRADE IN GOODS AND SERVICES - June 2003

Deficits were recorded, in billions of dollars, with China $10.0 ($9.9), Western Europe $8.0 ($8.3), Japan
$5.4 ($4.5), OPEC $4.0 ($4.4), Canada $3.8 ($3.8), Mexico $3.4 ($3.4), Taiwan $1.1
($1.4), Korea $1.0 ($0.9), Brazil $0.6 ($0.5), and Argentina $0.1 ($0.1).

Further, our total trade balance deficit with China is the largest (see U.S. Trade Balances by Country and Go to 'C' fo4r China and Canada data and 'M' for Mexico data:

Trade with China : 2003

NOTE: All figures are in millions of U.S. dollars

MONTH	EXPORTS	IMPORTS	BALANCE
January	1,988.30	11,409.60	-9,421.30
February	2,053.60	9,633.00	-7,579.40
March	2,424.50	10,094.10	-7,669.60
April	2,089.50	11,540.90	-9,451.40
May	2,013.10	11,875.00	-9,861.90
June	2,122.10	12,111.60	-9,989.50
TOTAL	12,691.10	66,664.30	-53,973.20

Trade with Canada : 2003

NOTE: All figures are in millions of U.S. dollars

MONTH	EXPORTS	IMPORTS	BALANCE
January	12,859.00	17,809.00	-4,950.00
February	13,248.00	17,593.00	-4,345.00
March	15,114.00	20,262.00	-5,148.00
April	14,633.00	18,443.00	-3,810.00
May	15,401.00	19,248.00	-3,847.00
June	14,795.00	18,585.00	-3,790.00
TOTAL	86,050.00	111,940.00	-25,890.00

Trade with Mexico : 2003

NOTE: All figures are in millions of U.S. dollars

MONTH	EXPORTS	IMPORTS	BALANCE
January	7,825.70	10,842.70	-3,017.00
February	7,065.50	10,965.80	-3,900.30
March	7,810.40	11,734.60	-3,924.20
April	7,849.30	11,193.50	-3,344.20
May	8,078.20	11,500.40	-3,422.20
June	7,959.30	11,382.70	-3,423.40
TOTAL	46,588.50	67,619.60	-21,031.10

Further, our top 10 trading partnbers can be found at Top Ten Countries with which the U.S. Trades - June 2003

and by checking the trade balance by country, our June 2003 deficit with Canada is $26B, and with Mexico is $21B, but with China ouir deficit is largest at $53B, even though the total trade is 3rd. i.e. We trade more with Canada and Mexico, but China buys far less from us than we import from them, resulting in our largest trade deficit being with China.

Top Ten Countries with which the U.S. Trades

For the month of June 2003

---

The values given are for Imports and Exports added together.
These Countries represent 68.77% of U.S. Imports, and 66.36% of U.S. Exports in goods.

                                                   Year To Date
                                    Total in         Total in
                                    Billions         Billions
 Country Name                       of U.S. $        of U.S. $

 CANADA                                 33.38           197.70
 MEXICO                                 19.34           114.21
 CHINA                                  14.23            79.36
 JAPAN                                  14.14            84.15
 FEDERAL REPUBLIC OF GERMANY             8.08            48.02
 UNITED KINGDOM                          6.46            38.12
 KOREA, REPUBLIC OF                      5.21            29.22
 TAIWAN                                  4.18            23.02
 FRANCE                                  3.93            22.96
 MALAYSIA                                3.06            16.72
 

Mr Reynolds closes with "If the rhetoric gets too annoying, ask the authors for a few facts. They just hate that" having himself provided only rhetoric and no facts. Above is what verifiable facts look like.

[SierraWasp]

"From 1994 to 2000, the growth in the trade deficit cost 3 million actual and potential jobs, most in manufacturing."

There it is!!! In all it's suckiness!!! ("the giant sucking sound")

The Clinton, Clinton & Gore, Inc. LEGACY!!! (brought to you by the Demonicrat Party)

[SierraWasp]

"Many critics on the left, along with Pat Buchanan, call for shifts that could endanger the world trading system."

Who needs a prior thread? The article it'self, right up front says it all!!!

Go! Pat, Go!!! Far, far away!!! I used to think highly of you, but you've gone round the danged bend!!!

[The Coopster]

..... most of this crapola comes from third party whiners who can't win elections based on positive aspects of their candidates. So they waste everyone's time on Free Republic moaning and groaning.

We have a winner!

You could post this exact sentence on many, many threads here, and it would be right on topic. Good job, Gramps!

[gulfcoast6]

Sure is, its the ole 'rich' again that gets the blame. It was the democracts causing industry to have high taxes, excessive regulations brought on by their friends 'the greenies', the take the profits, give it to the 'down and out' generation they created for the purpose of votes. So now? Industry leaves the states so they can make a profit.

[Liz]

If the rhetoric gets too annoying, ask the authors for a few facts. They just hate that.

Awhile ago, when the NYT was asked for the facts, they blithely said, " Just ask Jayson Blair." (/sarcasm)