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.
US Competiveness bump for later.....
Paine hit the nail on the head.
It is an almost hopeless task trying to educate Freepers concerning the realities of economics. They see the jobs lost from cheap imports. They totally miss the improvements in our standard of living that we get in return. They miss the fact that we export goods that are assembled out of the country and re-imported. Add a tariff to that industry and we lose jobs in the U.S.
I could go on but I think right now I’m going to go read some Thomas Paine.
For an RPG, it’s still dangerous enough when its charter is based on Stalin’s constitution.
Are you sure?
I heard that about two years ago. Then they seem to have fired the guy who promoted that idea, and I have not heard any more about it.
Everything in Walmart is imported from China. (I know, not literally everything, but pretty darned close)
Just pointing out, you are working in Panama.
:D
Who said anything about high wages? No one. I've heard the term "good" jobs which to me means above minimum wage and some medical insurance.
Won’t be for the Daisy BB gun. That thing is made in China.
It’s just a game.
Leftists will trumpet very slight temporary declines in world grain production as a crisis, but ignore ever-expanding meat production. People with more wealth rely less on grain and obtain meat instead.
The founding fathers hated free trade and yet built the greatest industrial nation on earth. NWO losers are giving away the store to communists and the the third world, F that. Globalist should vote for Hillary.
Turning raw crude oil into refined gasoline is also manufacturing. Refinery jobs are usually good paying, non union jobs, so naturally the Dems want to destroy them. A common excuse for opposing the Canada Pipeline is that it would only bring oil to southern (non union) refineries who would then sell the refined gasoline to China. Even if true, wouldn’t that increase both manufacturing and exports?
Is that academic phraseology or a personal juxtaposition of phrase? Bought Nike or Polo recently? Those $90 Polo shirts are now inexpensive and plentiful with all the cheap labor, aren't they? - Oh, wait... crap! they're $90! And... don't you just love your cheap IPhone - real cheap ain't it - since it is put together by people living on gruel.
Let's not even talk about the lost tax base from those "some Americans" - rather, let's talk about the fact that nothing is really cheaper or more plentiful because it is made overseas. Cheap labor increases profits but prices only decline basis availability and demand.
And finally, I thought a lower standard of living was a shrinking middle class, increase in food stamp consumption and 94 million working age people not working... Oh... wait again! That is what we have now from globalization.
This is a specious argument. It is like the farmer who loses half his crop to insects but claims his crops still grew, what is left of them anyway. How much MORE would output be if the 55,000 factories had not been off shored since 2001?
Agree. IMO, we have an eduction system that is a university/college jobs program for professors and administrators. Much as our government is a jobs program for attorneys.
There is no evidence that the reduced manufacturing costs by off shoring production is passed on to the retail consumer. As a matter of fact I am still waiting for Ford and Carrier to announce price reductions. I gave up waiting for Nabisco to lower the price of Oreo cookies.
But, I’m not talking about “buggy whips”. The factory I mentioned is just one of many. They produce modern convenience items. They employ tens of thousands of people. These people spend money in the local economy. This leads to addition jobs to include people who will be working at a large power plant.
These items are made specifically for the North American Market.
Samsung chose to build this plant in Queretaro because of low wage, low regulation and no tarrif when it comes across the border.
If we address these three areas, plants like these will be built here instead. We will reap the benefit.
I have been in the service business, it is not as profitable or as much fun as killing it with good hard products. Tried a restaurant decades ago - man did that eat my time and energy.
It’s worse than deaf ears and disbelief. These points are often met with profanity and accusations of lying or deceit.
It’s not the boys who are being lured towards college, as anyone who has step onto a college campus in the past two decades knows. If boys are not going to college in greater numbers and they are not going into the skilled trades, what are they doing? Drug dealing and gang banging?
I think part of the issue is that people see nearly a Trillion Dollars flowing out of this Country year in and year out due to an imbalance in our Trade Agreements.
No matter how things are spun, the United States always seems to end up on the losing end.
Whether it be Trade Imbalance or Automation, the People who are fortunate enough to remain Employed are paying for those who have lost their Jobs. Not everyone was working in a Factory manufacturing Buggy Whips in 1980.
The very idea that it’s perfectly fine because we can purchase a cheap Flat Screen TV or cheap trinkets at the Dollar Store loses its impact when the Social Programs need to be funded by a shrinking number of Workers.
Yes, there are statistics, there are perceptions and there are facts, but the reality of it all comes down to where we are today.
How did we end up doubling our National Debt to nearly $20 Trillion Dollars in just eight Years if Manufacturing is increasing? How is it that 95,000,000 People are out of the Workforce? Ditto increases in Welfare Recipients, Food Stamp Recipients and those claiming to be Disabled. All these figures are at an all time high so it obvious something isn’t keeping up.
Most vehicles sold in the US are made in the US. They just don’t have Big Three nameplates anymore.
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