Thursday, April 4, 2013

U.S. Manufacturing Jobs Needed ... We're Continuously Losing Ground as a Nation

U.S. manufacturing has been draining jobs for many years now. From time to time we hear about the importance of good jobs to our economic future, and we know that manufacturing employment has historically been a jobs booster.

However, the outflow continues and there appears to be little political policy directed at reviving this important piece of the U.S. economic equation.

Signs of Factory Revival Hard to Spot has the gruesome details:

"The idea that American manufacturing is on the cusp of a renaissance is everywhere these days—except in the hard numbers.

It's true that industrial production has grown twice as fast as the economy as a whole in this recovery, and manufacturers are adding jobs again. But economists see those gains as too small relative to what was lost in previous years to suggest a full-blown revival. Factories fell so hard, the logic goes, some gains are a given.

"There's simply no statistical evidence of a broader renaissance at this point," says Daniel Meckstroth, chief economist with the Manufacturers Alliance for Productivity and Innovation, an Arlington, Va., group that represents mostly large U.S. producers.

Mr. Meckstroth says measures that look deeper inside the sector continue to flash warning signs. Take factory closings. For the past 13 years, the rate factories have been closing has been declining. That's good. The trouble is the rate of openings has been falling even faster. Simply put, America's factories are dying faster than they're being born. . . .

To be sure, many U.S. manufacturers are doing better than they have in some time. That's visible in hiring. Manufacturers have added more than 500,000 jobs since early 2010, and (last week's) report from the Institute for Supply Management showed manufacturers continued expanding in March. But those gains pale compared with the deep hole created during the recession and just before it: U.S. factories lost nearly 5.7 million jobs from 2000 to 2010. . . .

Tracking the birth and death of factories "isn't a perfect indicator," says Mr. Meckstroth. "But it's the one thing we have that's most current—and it doesn't show any revival."

The nation's stubbornly wide trade deficit in manufactured goods is another trouble sign. If American factories have regained their competitive edge, it would make sense for them to be selling more abroad as well as at home—trimming the imbalance. But that hasn't happened.

Another way to gauge competitiveness is to look at the share of manufactured goods purchased in the U.S. that are imported. This includes everything from finished products, like a blender, to car parts that are then used in a U.S. factory to build a vehicle. A revived U.S. factory sector ought to be grabbing more of its home market, but that also isn't happening, at least not yet.

Mr. Meckstroth estimates that in 2012, imports accounted for nearly 40% of the manufacturing goods consumed in the U.S.—slightly more than the year before. Indeed, after dropping a bit during the recession, the share of imports has been rising for years. It was a mere 9% in 1967, when the government began tracking this measure.

Many say falling energy costs, driven by the nation's natural-gas boom, will help fuel a manufacturing revival. But the price of natural gas is only one factor companies consider when they're deciding where to build.

Goldman Sachs economist Jan Hatzius, in a recent note to investors, said "rising productivity, subdued labor costs, low energy prices, and cost increases abroad have made the United States a much more attractive place to produce, especially on a relative basis." But he also sees no evidence that a broader revival is under way.

"Measured productivity growth has been strong," he wrote, "but U.S. export performance—arguably a more reliable indicator of competitiveness—remains middling at best.". . .

Meanwhile, many U.S. producers say some of the biggest barriers to a revival are factors like health-care costs and mounting regulations that make it costly to expand domestic operations."

Summing Up

40% of the manufactured products we buy now are made outside of the U.S. compared to 9% in 1967. That's a staggering number of lost employment opportunities for U.S. workers.

We need to bend that disastrous trend and head for 30% and below rather than continue on the present path toward 50% and above. And it won't happen just by talking about it. It will take a substantial commitment by our government knows best gang to encourage the necessary private sector investment.

More President Obama "feel good happy talk" emphasizing the 'need' for additional public financed "investments" in electric cars, other green projects and ObamaCare won't do the trick. They're merely examples of simple misplaced priorities and wasted time and taxpayer money. Our priorities need to change, and real and lasting private sector jobs growth needs serious attention. Among other things, that requires serious tax reform to encourage domestic investment.  What we don't need are higher taxes to support more wasteful government spending in the name of 'investing.'

The simple fact is that manufacturing jobs are really good jobs, and we don't have nearly enough good jobs. Ditto for energy related jobs.

And with respect to increasing employment by building more public infrastructure, that won't solve our manufacturing jobs problem either. In fact, more government created jobs related to health care and construction won't do anything for the competitiveness of U.S. based manufacturing.

If we don't change direction and begin to look to the private sector for jobs and growth, it looks like Europe here we come.

Let's not do that to our young people, our kids and our grandkids.

That's not fair and that's my take.

Thanks. Bob.

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