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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Manufacturing
November 5, 2013 at 10:22 AM

Manufacturing jobs aren’t staging a big comeback

Factory orders rose 1.7 percent in September powered by demand for commercial aircraft (n.b.). Their value, $490.8 billion, now stands at a record, surpassing the previous top reached before the recession.

What missing are the jobs, which historically have paid much better than most service positions. Factory jobs were little changed in the September employment report. As the chart below shows, manufacturing employment entered a deep slump after 2000 (when China entered the World Trade Organization) that was only worsened by the Great Recession.

On average, 17 manufacturing operations closed every day between 2000 and 2011, according to the Information Technology and Innovation Foundation. Employment has not made a meaningful rebound.

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This data seems at odds with the many stories we read over the past year about manufacturing coming back to the United States.

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Comments | More in Aerospace/Boeing, Manufacturing | Topics: Manufacturing jobs

April 15, 2013 at 10:48 AM

Not so fast on the U.S. manufacturing renaissance

Alan Tonelson, research fellow at the U.S. Business and Industry Council, has been one of the few expert observers to push back against talk that rising wages in China, increased transportation costs and technological advances at home foreshadow a major turnaround for American manufacturing. President Obama consistently pushes advanced manufacturing at home as part of his economic agenda. The Brookings Institution has devoted its brainpower to the topic. But outside of a few coddled companies (hello, Boeing), is manufacturing even holding its own, much less turning around, particularly as an employer? Tonelson says no.

In a new paper, Tonelson lays out the data showing how China kept increasing its market-share penetration in the United States through 2011. To put a fine point on it:

These Chinese gains have occurred in a wide range of capital-and technology-intensive industries, including semiconductors and other high value electronics goods, machine tools, sophisticated industrial machinery, fabricated metal products, and chemicals, where producers in high income countries like the United States are supposed to enjoy overwhelming natural advantages. Yet China’s inroads in these capital- and technology-intensive sectors are mirroring earlier trends in labor-intensive industries like apparel and toys, where significant U.S.-based presences have all but disappeared.

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Comments | More in Aerospace/Boeing, China economy and business, Manufacturing, Trade

April 3, 2013 at 1:21 PM

Bertha’s dig at U.S. manufacturing

A crew member of the ship carrying Bertha, the giant boring machine, is in red (far right) dwarfed by the 57 1/2-foot cutting face of the machine.

A crew member of the ship carrying Bertha, the giant boring machine, is in red (far right) dwarfed by the 57 1/2-foot cutting face of the machine.

The arrival of “Bertha,” the giant machine that will bore the tunnel for Highway 99 is a super-sized reminder to take the meme about a renaissance of American manufacturing with plenty of salt. The world’s largest tunneling machine is made in Japan by Hitachi Zosen Corp. We once made such machines here. American machines bored the (second) Cascade Tunnel for the Great Northern Railway, an engineering miracle for its time, which opened in 1929. American companies made all the components for the Hoover Dam. Those days are gone.

The most startling evidence of withered American industrial power is the new San Francisco-Oakland Bay Bridge, whose suspension portion was manufactured in China and merely assembled here. Former Reagan administration trade negotiator Clyde Prestowitz raised pointed questions about the project’s quality and long-term costs — however inexpensive it appeared to decision-makers:

I wonder how the Chinese got these capabilities that Americans apparently no longer have. It was by building their own projects for themselves and developing the capabilities. Twenty years ago China didn’t have companies that could do most of this kind of work. But the Chinese didn’t call the Americans in to build their bridges for them. They invested in developing the capacities necessary to build their own bridges. That’s what we did when we built the Golden Gate. People and corporations learn by doing and if they don’t do they don’t learn and they don’t invest and then they can never do.

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July 2, 2012 at 9:44 AM

Hangfire on the economy || Jon Talton

A month ago, it looked as if the economy was confronting its worst dangers since the collapse of 2007-2008. In the United States, job creation and GDP growth had slowed significantly. Washington, D.C., was paralyzed and unable to address the situation. Europe, already in another recession, was facing the breakup of the eurozone. And growth was decelerating at an alarming rate in China. Since then, the Dow Jones Industrial Average has rebounded, a euro-supporting government was elected in Greece and life goes on.

Have we dodged the bullet? Unfortunately, no.

Today, the Institute for Supply Management reported that its manufacturing index had contracted for the first time since 2009. Things are no better in Europe, and Germany’s manufacturing sector is now slipping fast. Yet another report showed China factory output fell in June. And, as the New York Times reported, Beijing manipulates data to conceal the real condition of China’s economy. Commodity prices are dropping because of fears of a worse slowdown.

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Comments | More in Banking, China economy and business, Eurozone, Global economy, Manufacturing

January 25, 2012 at 1:20 AM

What would Henry Ford tell Apple?

Yesterday’s post on Apple outsourcing most of its manufacturing to — how does one put it? — Chinese workers in serf conditions provoked more comments than anything I’ve written at the Seattle Times, or any other newspaper for that matter. The loss of our high-tech manufacturing base is not new, Intel’s Andy Grove wrote about it two years ago, and it’s not confined to Apple. But as America’s middle-class continues to decline, seeing itself more and more pushed into low-wage service jobs, the issue becomes more combustible.

Too many of our business leaders have swung 180 degrees from Henry Ford at the start of the 20th century. Before Ford, the automobile was an expensive, rich-man’s toy. Using advanced mass production, he made it affordable to most Americans. But he did more, paying his workers good wages so they could buy his products. Ford’s insight upset many robber barons of the time, but he wasn’t alone. John Henry Patterson of National Cash Register did much the same. With business leaders such as these, the sweatshops of the Industrial Revolution were banished and America was on its way to creating the largest middle-class in history.

What would they say to America’s CEOs today?

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Comments | More in China economy and business, Jobs/Unemployment, Manufacturing, Tech economy, Trade

October 24, 2011 at 9:40 AM

U.S. manufacturing at the turning point

We know a few things about manufacturing: It produces more high-wage jobs than most service sectors; its suffered since NAFTA and China’s entry into the World Trade Organization, with tens of thousands of American factories closing and sectors such as textiles being decimated, and yet until recently manufacturing had been a bright spot in what passes for recovery. We know it’s critical to the Seattle-area economy, and not just with Boeing. Then there are things we think we know, such as manufacturing here faces an inevitable decline because of a surplus of cheap labor and unfair trade practices overseas.

Still, a recent report from the consulting firm Booz & Co. and the University of Michigan’s Tauber Institute for Global Operations says that American manufacturing is both stronger than generally thought, and yet at a critical crossroads that will determine its future.

“As labor costs and currency rates play a smaller part in manufacturing decisions, there is an opportunity for U.S. business leaders and policymakers to rise to the challenge and create conditions that support manufacturing,” said Arvind Kaushal, Booz & Co. partner. “The potential for a rebound is there, but only if the right actions are taken.” The report identified sectors where the U.S. is a global leader, including aerospace, semiconductors, medical equipment and machinery. Then the ones on the edge: Paper, plastics, electrical equipment and components, computer equipment, fabricated metal products, pharmaceuticals, printing, and some auto equipment companies, all “besieged by low-cost overseas competitors. They could become global competitors themselves or see their operations displaced to other countries.”

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July 12, 2011 at 9:55 AM

‘Industrial policy’? America already has one (that’s not working)

Those who hold the superstition that an Ayn Rand “free market” is the cure to all ills — despite its disastrous results in 2008, etc. — meet every constructive idea to get the American economy out of the ditch with: “That’s industrial policy!” Industrial policy, you see, is always some failed commie central planning nightmare from the Soviet Union and eastern Europe circa 1980. And that’s been swept into the dust-bin of history.

In fact, America does have an industrial policy, one constructed by years of often convoluted, often ineffective measures produced by Congress and presidents, pushed by the army of lobbyists for the connected huge corporate interests.

American industrial policy includes big tax cuts for the wealthiest and legal tax dodges for big corporations; special treatment for a few big exporters such as Boeing and Caterpillar; huge agricultural subsidies; encouragement to offshore jobs; the Military-Industrial Complex (Iraq will buy F-16s from Uncle Sam); taxpayer backing for deregulated Wall Street and the TBTF banks no matter what they do; union-busting NLRBs; heavy subsidies for house building, especially sprawl, and house ownership; more subsidies for the fossil fuels industries; decades of federal support for airlines and freeways, but not trains and transit; a for-profit health system supported by Washington; incentives for job-killing mergers; failure to protect small competitors with antitrust enforcement against consolidation. I could go on. But none of this comes from the benign magic of the “free market.”

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Comments | More in Health care, Housing, Income/living standards, Industrial policy, Infrastructure, Jobs/Unemployment, Labor unions, Manufacturing, Politics and the economy

June 30, 2010 at 9:45 AM

How lost manufacturing pours flames on the unemployment fire

A good deal of dread is leading up to Friday’s unemployment report. The consensus is trending not just to continued weak hiring but to actual losses of jobs. As Ryan Sweet of Moody’s Economy.com puts it:

As measured by ADP, June’s net gain of 13,000 private jobs was noticeably below expectations and below May’s revised gain of 57,000 (previously 55,000). ADP has tended to undershoot the increase in private employment over the past year as measured by the Department of Labor, but this latest weakness makes us a little uneasy about our forecast for a net gain of 100,000 private payroll jobs. Including census layoffs, we forecast that Friday’s official employment report will show total nonfarm payrolls fell by 155,000 this month.

Many factors are at work here, but we can’t overlook the increasing U.S. dependence on financial work and housing — both bubble-driven and unsustainable — as its manufacturing base has eroded. Since 1890, America has been the world’s manufacturing leader based on output. But it’s expected to give up that spot to China next year.

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Comments | More in Aerospace/Boeing, Manufacturing

March 15, 2010 at 9:25 AM

Dodd’s big financial reform push looks smaller and smaller

The regulatory bill being announced today by Sen. Chris Dodd, D-Financial Services, reminds me of Sarbanes-Oxley, the watered-down enforcement bill passed in the wake of the Enron/WorldCom/Etc. scandals. Lots of paperwork. No real change to corporate venality.

For example, the New York Times reports that it will make no major changes in the regulation of derivatives. Yes, the financial weapons of mass destruction, as Warren Buffet called them, will get to keep ticking. Derivatives, largely unregulated and opaque, were at the heart of the financial Great Panic that sent the system to the brink and cost American taxpayers trillions.

The too-big-to-fail banks would remain intact — keeping another explosive armed and dangerous. No new wall between risky investment banking and the commercial banks backed by taxpayers. More power would be vested in the Federal Reserve, which did such a dandy job in seeing and stopping the mischief that got us into the worst downturn since the Great Depression — and is essentially owned by the banks themselves. Consumer protection? Don’t hold your breath. And yet Dodd’s modest proposals will be heavy lifting. Something is very wrong here.

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Comments | More in Bailout, Banking, Federal Reserve, Income/living standards, Manufacturing

December 1, 2009 at 10:10 AM

Manufacturing troubles remain a drag on recovery, trade and jobs

Top of the News: The Institute for Supply Management’s manufacturing index seems consistent with recovery, coming in at 53.6 for November; any number above 50 signifies expansion in the sector. Unfortunately, the reading sagged from 55.7 the month before, tripping up what economists had hoped would be a steady climb out of recession.

A deeper look shows that the index provides no relief for the biggest immediate problem facing Americans, unemployment. Only six of 18 manufacturing industries reported growth in employment. Only 11.7 million Americans worked manufacturing as of October. That compares with 17.3 million in October 1999.

Not only do manufacturing jobs pay better than their counterparts in service industries, they tend to add real value to economic activity (as opposed to selling mortgage swindles). They are also twined with our trade issues. Even fewer manufacturing jobs are now in industries that export, a key part of our huge manufacturing trade deficit.

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Comments | More in Jobs/Unemployment, Manufacturing


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