|
|
| weblog/wEssays archives | home | |
|
Four Snapshots of U.S. Manufacturing (January 17, 2007) Frequent contributor Albert T. found some fascinating Census data on manufacturing and finance/insurance employment in New York. Lately I had been thinking that the best business is to mind your own business, so took a look... Basically I took a look at NY State manufacturing and finance and insurance from economic census of 1997 and 2002:Thank you, Albert, for this snapshot. What else can we discern in the data? Since everyone's in a hubbub over declining manufacturing, let's observe that NY State manufacturing employment declined by 145,000 jobs from 1997 to 2002 (a recession, year, we should note) or by 18%--a hefty drop. But as the figures reveal, employment in finance and insurance offset the losses with a gain of 170,000 jobs (a 28% rise), so that total payroll (adjusted for inflation) stayed about the same. How many of those jobs in finance and insurance are housing-bubble related? probably a significant number. The outlines of the next recession are visible if those 170,000 jobs vanish along with the housing boom. It's also interesting to note that total payroll didn't rise much, suggesting that the "boom" of the past six years has not been one of rising employment or wages but a paper money boom of asset inflation and derivative trading. Next up is Adam Florzak's blog entries on Home Depot moving the Ridgid tool factory from the U.S. to China. (Thanks, Bob Nardelli, he of $210 million "golden parachute" fame.) Adam is a very smart young man who I have mentioned in the past, and I highly recommend his recent blog entries on Ridgid Tools and Home Depot. What Adam found in comparing prices between the crappy offshore tools made under the Ridgid brand for Home Depot and the quality tools made by U.S. maunfacturers in the U.S. (Skill and Milwaukee) amounted to $10 or $20--not much over the life of a tool. 
As I have stated before: this illustrates that much of the gains made by offshoring U.S.
manufacturing have flowed to corporate profits, not consumers. We are fed ad nauseum
the line that offshoring has been such a boon to U.S. consumers, yet why have corporate
profits run up to a gargantuan, record-breaking percentage of U.S. GDP (see yesterday's entry)
even as wages and benefits have fallen (as a percentage of GDP) to 40-year lows? Is there
any connection to the offshoring of U.S. manufacturing and these immense profits? Gee, do ya
reckon? That isn't the entire profit picture, to be sure, but it's certainly part of it.
Next up: the other side of the outsourcing story: The Spin Cycle of Outsourcing: A consultant tells the other side of the story (S.F. Chronicle Magazine). Confounding easy expectations, the insider/writer of this report says that the most profitable factory in a global tech company with manufacturing all over Asia is in Silicon Valley. It's not just the (lower) cost of wages, in other words, which make manufacturing profitable. Last up is my own anecdotal story about a factory in Hampton, Iowa. On a recent visit to the northern Iowa town of Hampton (my one-stop "international book tour"--what did you expect from an unknown "eccentric"?), one of my guides took me to a plant outside town which manufactured a specialty-coated glass. The coating required high-tech ovens, and it wasn't difficult to see why offshoring the plant made little sense: glass is very heavy and easy to break, and the manufacturing process requires expertise with giant machine tools and ovens. Moving such a factory to China might save some on wages but that would be offset with high shipping costs, breakage and months-long delivery delays. The point: a significant percentage of manufacturing cannot be offshored for reasons other than wages. But we don't hear much about these successes, do we? Lastly, a personl comment from Albert on debt and spending. Albert is a young person just out of college, and his comment provides a window into the seductions of "cheap" debt: We are entering an interesting time, when those who had illusions are drinking sand and checking into reality. I hope the bankruptcy provisions are reversed but in trade off there will probably be an extension from 7 years to 10 years or some other retribution. I am so sad to see my friends delude themselves, one went into real estate mortgage brokering the other started drinking from the debt fountain and can't contain himself. Perhaps this is a lesson in life which will temper their learning for the future. Everyone around seems caught in some sort of irrational behavior enabled by the surroundings. My friend proudly told me that he spent 1500 dollars in 3 days just on going out, clubbing, social status stuff in the spur of the moment. Pehhaps everyone spends the same just I am poor, or do not spend what I don't have. For more on this subject and a wide array of other topics, please visit my weblog. 
copyright © 2007 Charles Hugh Smith. All rights reserved in all media. I would be honored if you linked this wEssay to your site, or printed a copy for your own use.
|
||
| weblog/wEssays | home |