“To argue with a man who has renounced the use and authority of reason, and whose philosophy consists in holding humanity in contempt, is like administering medicine to the dead, or endeavoring to convert an atheist by scripture.”
Posted on 07/28/2016 5:37:52 AM PDT by expat_panama
Did you hear that U.S. manufacturing just had another big month? That output has risen about 20 percent in the past six years? That industrial capacity is actually expanding?
Probably not. At most times, and especially in election season, the talk surrounding U.S. manufacturing is one of relentless decline: a loss of jobs, the shutting down of factories, increased competition from foreign countries, a global war in which the U.S. seems to be on the losing end.
And of course, it’s true. At some level, manufacturing has declined dramatically — as a direct employer of American workers. According to the Bureau of Labor Statistics, 12.3 million Americans had payroll jobs in manufacturing in June. That’s down about 30,000 from June 2015, off nearly 1.9 million from June 2006, and down 4.9 million from 1996. In the past 20 years, in other words, America has shed 28 percent of its manufacturing jobs. In good times and bad, in recession and expansion, the manufacturing sector employs fewer people. It’s impossible to dismiss or talk around this trend.
But the decline of employment isn’t the whole story. Not by a long shot. In fact, in many significant ways, U.S. manufacturing is thriving. The point of manufacturing is to make stuff that people and companies will buy and use, not to employ people to make stuff. And by the former measure, U.S. manufacturing is actually doing quite well. (Note: Rex Nutting at Marketwatch made this point back in March.)
Take a look at this long-term chart of industrial production, courtesy of the U.S. Federal Reserve. Over the past 100 years, the index, which measures the value of the output of the manufacturing, mining, and utilities industries, has risen steadily. But the rise has generally continued in the last several decades — decades in which the narrative was that manufacturing has been in apparent decline.
What accounts for this disconnect between the rising dollar value of manufactured goods and falling employment? A few things. First, the production of less-expensive goods, like T-shirts, toys, and the like, has long since gone offshore. As a result, manufacturing in the U.S. is disproportionately a high-end activity: heavy machinery, tools, cars. I visited a General Electric plant in South Carolina a few years ago that made gas turbines for power plants — at US$90 million apiece. Boeing makes large airplanes in this country, which can cost about $200 million each. America may not make as many objects as it did 30 years ago, but the average value of an object made in the U.S. has risen sharply.
Second, there’s productivity. Manufacturing, from the outset, has been a pioneer in labor-saving technology. A century ago, Frederick Winslow Taylor walked around factories with stopwatches to time workers and suggest improvements. Henry Ford spend untold hours devising a hyper-efficient assembly line. Then came total quality management, Six Sigma, lean manufacturing, and all the other trends and practices. The overriding imperative driving these efforts has always been to figure out how to produce more (and faster) with fewer resources — raw materials, energy, effort, and, yes, labor.
In an often-overlooked phenomenon, quarter after quarter, year after year, companies have invested in and applied technology to the manufacturing process. Recent advances in computer technology have transformed efficiency efforts from an analog undertaking to a digital one.
The result is that factories today can actually be slightly eerie places, especially to someone accustomed to working in a densely populated newsroom or trading floor. Over the past several years, I’ve visited a range of factories: a steel fabrication plant in New York, a window manufacturer in Florida, car factories in Ohio, a frozen-French fry plant in North Dakota, a jet-engine plant in North Carolina, a producer of plastic coffee pods in Virginia, a jar manufacturer in Indiana, and a fishing-line producer in South Carolina. The common denominator in each: There just aren’t that many people in them. There are lots of whirring gizmos, belts that move goods through the stages of production, and machines that package and stack the finished products on pallets. But the people on the floor are mostly involved in tending to raw materials, quality control, maintenance, and oversight.
There’s a third point that is overlooked when we focus only on direct factory employment as a measure of manufacturing’s strength. Manufacturing has, to a large degree, unintegrated. That is to say, the activity you see on the factory floor is the culmination of all sorts of other activity that happened elsewhere. A rule of thumb in the gas-turbine or jet-engine business, for example, holds that for every job in the factory, there are eight in the supply chain.
And those aren’t just jobs at the manufactures of the components that are assembled in the factory. In fact, there are a lot of service jobs involved with manufacturing, many of which are done by people who don’t work directly at manufacturers. All the materials have to be moved — on trucks, trains, and planes. Marketing and sales professionals help goods find buyers. Factories wouldn’t be able to run without security, maintenance, landscaping, and food service.
Put another way, manufacturing may not simply be more robust than is commonly understood; it may support more employment than many people think.
Of course, it’s natural to discuss direct employment when determining the state of manufacturing in a given country. There’s an important human story behind every job that has been lost in manufacturing over the years. But when we’re trying to grasp the implications of complex economic phenomena and technological change, one data point doesn’t always tell the entire story.
Slap a 20% tariff on that junk. We have to pay true market price for imported goods to pay for the social costs. I don't like it but the "displaced" get to vote.
The cost of de industrialization.....
“In fact, in many significant ways, U.S. manufacturing is thriving.”
Not consumer goods, for sure.
Go into the big box stores and try to find something made in the United States. Good luck.
Not too long ago, I bought a steel tape, Stanley, and it has an American flag on it, signaling it was made in the United States. They all do that, put a flag on the product, if manufactured in the United States. Trouble is, you don’t see many flags.
I was looking for some tools at Lowes lately. I could not find any made in the United States (all American companies). I say that to warm the hearts of some posters here. They won’t be satisfied until everything is made overseas.
And able to work as long as they care to. In certain disciplines (like legacy OS coders), they're looking for them to come out of retirement for nice paying contract work.
The problem is that many Americans (including certain politicians) keep claiming they will bring back “traditional” manufacturing jobs that require limited skills, but will pay high wages and offer full benefits.
The sector that is growing is advanced manufacturing; it’s the type of operation described in the article and other posts on this thread. Lean, hyper-efficient operations with extremely skilled workers who have mastered skills ranging from IT and production planning, to trouble-shooting and team management.
It’s not the type of job you can enter directly out of high school—but with 6-18 months of highly specialized training, you can get in on the ground floor. Entry-level technicians with a Siemens Mechatronics certification (Level I) start out at about $50K a year, plus overtime and full benefits. With a Level II credential in the same field, your starting salary moves up to $70K a year, plus a complete benefits package and overtime.
At any given time, there are roughly 500-600,000 advanced manufacturing jobs that are unfilled in this country. Unfortunately, too many people have been taught that manufacturing is an “inferior” career and you must have a four-year degree to be successful. There’s also the matter of our “government” schools. Too many kids graduate and lack the basic skills needed to make it through an advanced manufacturing program. But for the kids with the right educational foundation (and the drive to succeed), they can transition into a solid career while a lot of their classmates—with worthless undergraduate degrees—are ringing up orders at Starbucks.
Right, but many Americans buy foreign cars, tractors, and airplanes made elsewhere. Assembled in US doesn’t mean all parts are made here. Take electronics as another example.
Walmart is actually starting a Made in USA products campaign.
It’s not a requirement to have “(my) own statistics” to disbelieve those that the government puts out, i.e. selectively. And these are specifically executive branch statistics, not those of the whole government.
...the engineers I know are employed....
Sounds like folks that go to school and work hard are able to get rich making things, and them that don't can post their complaints on these threads. Is this a great country our what!
By “developed countries”, is this the UN’s term, which replaced First and Second World? Remember, they still define Red China (formerly “Second World”) as “developing”.
Especially the guy actually behind the pen.
That is correct. It is also the major point of the article. People get very confused about this. Yes, manufacturing jobs are declining. But manufacturing output isn't.
That's life. Employment in other sectors is growing. Buggy whip factories are not doing well. Software factories are. Times change.
Good article and charts that explain things to those who care to see. Manufacturing in the US is mostly a B2B enterprise rather than a B2C enterprise and that’s why people will fall for the line about US Manufacturing falling.
But it helps your argument if you can say, "The government statistics are wrong and this is the evidence that shows it" rather than just saying "The government statistics are wrong because I say so."
Too many kids graduate at an 8th grade level, unable to work at community college 101 levels. Our colleges have remedial classes to bring their primary skills up to 12th grade levels. Thank you pubic school teachers and your NEA for that.
Notice it grew slightly during the depression in the twenties and had a WW2 bump - but by the chart, not much. Manufacturing even grew during the Carter administration.... Wow! And, what about all the factories closing and our trade deficit?
If you want a true picture, overlay charts of our trade deficit and population growth - then list everything they consider industrial production. Answer? It's all about population baby! Millions up millions of new people will move the chart even as our manufacturing jobs are shredded and moved overseas or to Mexico.
Excellent points. Nice post. But don’t expect many to believe you.
For some apparently. Not me. I like up-trends better than down-trends.
I'm voting for Trump. I am for Trump Big Time. But he not going to rebuild the manufacturing sector of the 70's or 80's not matter what he tells us.
We build stuff overseas because they can do it cheaper. That means some Americans lose their jobs. It also means you and me get more stuff. If you want to get those jobs back just add a tax (tariff) on imported goods and it will happen. The jobs will return and you and I will pay for it with a lower standard of living.
You need to read a little more Milton Friedman and a little less Trump to understand this argument.
We also need to “adjust” our education system. Too many kids that have no business on a college campus are allowed to enroll and founder, racking up huge amounts of student loan debt.
Normally, I’m not a fan of anything European (except certain automobiles), but they have the right approach regarding secondary education. Kids who don’t test well enough for college are steered towards the vo-tech track at the end of middle school, and are enrolled in high schools that put them on a pathway to one of the trades or specialized industrial skills. Apprenticeships are very common and represent an important part of the overall pipeline.
I bought my current house through a real estate agent who is a Brit ex-pat. In high school, he was placed into a school that trained him as an industrial maintenance technician. He did well and the program had a provision for top students to go on to college and earn a degree related to the field. So, after 7 years of apprenticeship, work and study, he not only had a marketable credential, he had a bachelor’s in mechanical engineering as well. And like a lot of Brits, he promptly bolted for the states, spent 25 years working for an American company in Chicago before taking early retirement and earning his real estate license.
American students can do the same thing, but the pathway is far less structured. Instead, we have lots of marginally-educated young people enrolled in college degree programs that are worthless, or they can never complete. A trade, apprenticeship or advanced manufacturing pipeline is often a back-up plan—if it is even considered.
There are freepers and there are freepers. Some are like you and me and we work for a living. Others remind me of what goes way back to the time of the founding fathers -
“To argue with a man who has renounced the use and authority of reason, and whose philosophy consists in holding humanity in contempt, is like administering medicine to the dead, or endeavoring to convert an atheist by scripture.”
The UN is not really a serious reference for anything. It’s just a role-playing fantasy game.
The Organisation for Economic Co-operation and Development (OECD) is taken seriously at providing economic definitions and data.
Most economic data is abstracted selectively to serve some political purpose. Probably no one would be much interested in aggregate economic data if there was no political opportunity to be made from it.
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