from the editor's desk : manufacturing jobs

Think you've got it bad? Be happy you aren't in China

Lee_Teschler — Wed, 11 Mar 2009 19:53:00 GMT

China might look a lot better than the U.S. right now for those affected by the drastic economic slow-down. After all, the Chinese government is stimulating the economy there in a way that will produce real jobs quickly, in contrast to the ineffective stimulus measures we are seeing here. But don't apply for your Chinese visa just yet. Listen to the words of Kerri Houston Toloczko, a Senor Analyst for the Alliance for American Manufacturing (AAM):

“Despite its meteoric rise to global economic dominance, China has build a high rise economy on a foundation of mud,” states Toloczko.

“As manufacturing facilities popped up rapidly over the last decade, China filled jobs by encouraging massive migration from outlying Chinese villages into burgeoning factory centers. But in their plan they forgot the needs of the workers themselves.”

In the last year, over 20 million Chinese migrant workers lost their jobs as over 125,000 factories closed. The government heavily subsidized the manufacturing build-up, which has now led to a phenomenon known as “runaway bosses.” As factory owners have no personal investment in their businesses, they are leaving town to disappear into China’s one million villages and among its 1.3B people without first paying wages to their now unemployed workers.

China has no social safety nets that cover unemployment, medical, or retirement benefits, people are desperate and angry, Toloczko says. “China is currently experiencing at least 1,000 demonstrations each day - some of them violent - in factory centers and in rural areas when laid off Chinese migrant workers return home and find no jobs there either.”

The AAM has been championing the idea that the U.S. gets a raw deal when trading with China, and Toloczko sees an opening on that score.

“Although the Chinese government is trying to cure its recession with a $586B stimulus plan, it is distracted by massive social unrest that we don’t have here in the U.S.,” Toloczko concludes. “China is paying the price for shallow growth, manufacturing substandard consumer products and ignoring its social problems. But America’s economy is wide and deep, and built on solid footing. As China pays the price for its economic aggression, this may be our chance to reinvigorate our production capacity and finally level the playing field for our manufacturers.”

good luck trying to find a domestically produced pair of sneakers

Lee_Teschler — Tue, 29 Jan 2008 18:52:00 GMT

How much economic stimulus do you think tax cuts will bring? Not much, according to

the U.S. Business and Industry Council.

Their argument is that so much manufacturing has gone overseas that it is almost impossible to spend money on something produced domestically. So any tax rebate to consumers will go toward increasing the trade deficit, not the result politicians had in mind.

The Private Sector: Too many imports could spoil stimulus plan

Tuesday, January 29, 2008

Alan Tonelson and Sarah Linden

Before Fed Chairman Ben Bernanke decides on the next interest rate cut to stimulate the economy and head off a recession, he really needs to listen to ... Ben Bernanke.

So do the Congress and the president, who have concocted a stimulus plan of their own. In recent testimony on Capitol Hill, Mr. Bernanke unwittingly made clear that the conditions needed to turn lower borrowing costs and tax rebate checks into actual growth are largely gone. The reason: Goods from abroad so thoroughly dominate the purchases of U.S. households and businesses that encouraging much more American spending no longer encourages much more American production.

Alan Tonelson is a Research Fellow at the U.S. Business and Industry Council, a national business organization comprised mainly of family-owned domestic manufacturers. He is the author of The Race to the Bottom and a contributor to the Council's AmericanEconomicAlert.org Web site. Sarah Linden is a Media Relations Associate at the Council.

As Mr. Bernanke told legislators who wondered if it matters where stimulus money is spent, "Well, you'd hope that they would spend it on things that are domestically produced so that the spending power doesn't go elsewhere."

What Mr. Bernanke meant was that buying products (or services) made in the United States creates the biggest and quickest domestic growth bang per stimulus buck because it encourages companies to ramp up output and possibly build new facilities and hire more workers. These moves in turn would create new business for supplier firms and put more money in employees' pockets -- creating still more productive opportunities and indeed a virtuous growth cycle.

American spending on imports would increase U.S. growth as well -- by stimulating the wholesale and retail and transportation and warehousing sectors. Higher profits and stock prices in these sectors would help, too, by enriching American investors. But the domestic growth boost would be more modest -- especially if companies, as is increasingly the case, invest many of the profits overseas. And these effects won't materialize nearly as quickly as most economists and politicians insist is needed to prevent a slump.

Unfortunately, this smaller stimulus bounce is inevitable -- and resulting growth will fall well short of politicians' and voters' expectations -- because import levels have grown so high for so many types of manufactured products.

Consumer goods are the types of purchases likeliest to be made with rebate or other stimulus dollars that are spent (as opposed to saved). Yet in 2006 -- the last year for which detailed data exists -- more than 61 cents out of every dollar Americans spent on such goods was spent on imports. In 1997, that figure was about 38 cents.

In many major consumer goods categories, moreover, the rates of import penetration are much higher. For example, in 2006, nearly 96 percent of the men's dress and sport shirts sold in the United States were imports. More than 90 percent of the non-athletic shoes came from overseas, along with nearly 90 percent of the women's coats, and more than 86 percent of the women's blouses.

Moreover, this trend shows no signs of stopping for two reasons. First, these surging import levels have simply overwhelmed the remaining U.S.-based producers of these goods, meaning that domestic alternatives simply no longer exist in many cases. Second, even in industries where import penetration is much lower in absolute terms, rapid growth means that the days of many competitive domestic producers are numbered.

Import penetration is less advanced in many capital goods industries -- the products that companies buy to build, equip, upgrade and expand factories and other facilities. But the levels are still high enough to undermine the domestic growth benefits of business tax breaks.

Government data indicate that, in 2006, nearly 34 cents out of every dollar spent by businesses on plant and equipment was spent on imports. In 1997, this figure was just over 21 cents. As in consumer goods, however, import penetration is much higher in many critical capital goods sectors -- which just happen to create the economy's best-paying jobs on average, lead the nation in productivity and generate most of America's productivity growth.

In 2006, for example, nearly 81 cents of every dollar U.S.-based businesses spent on machine tools purchased imports. For construction equipment, the figure was nearly 50 cents; for power generation turbines, 56 cents; and for semiconductors that archetypical industry of the future, more than 47 percent of the chips used in America in 2006 came from overseas -- up slightly from 44 percent in 1997.

Why has the import tide grown large enough to sandbag Washington's best-laid stimulus plans? Failed trade policies deserve much of the blame. Starting with the North American Free Trade Agreement in 1993, too many recent U.S. trade deals have focused too tightly on helping multinational companies move jobs and production offshore, instead of opening foreign markets to U.S. made goods.

Second, Washington has failed miserably to fight foreign predatory trade practices like currency manipulation and subsidization and dumping that hurt competitive domestic producers and their employees for reasons having nothing to do with free markets or free trade.

Yet these trade-related problems won't be fixed unless voters demand change much more effectively. And recapitalizing domestic industry to pursue the new opportunities created will take even longer.

Therefore, Americans for now may have no choice but to accept that many of the stimulus plans' benefits will leak overseas, and that near-term economic performance will be modest at very best. But it's not too early to insist that U.S. leaders start recreating the foundations for solid, healthy growth -- and stop making policy as if the global economy and the trade-related mess they created didn't exist.

Another 200,000 manufacturing jobs down the drain

Lee_Teschler — Fri, 04 Jan 2008 19:49:00 GMT

This hit my inbox this afternoon from the Alliance for American Manufacturing after the Commerce Dept. jobs report of this morning:

According to the latest figures from the Commerce Department, the United States lost another 31,000 manufacturing jobs in December in addition to the 13,000 lost in November. For the year 2007, the United States lost 212,000 manufacturing jobs. Seasonally adjusted U.S. manufacturing employment now stands at 13.919 million. 2007 also marks the first year that U.S. manufacturing employment has fallen below 14 million since 1950.

“The real shame in the continuing decline of U.S. manufacturing employment is that these are good-paying jobs that can’t really be replaced,” said Scott Paul, director of the Alliance for American Manufacturing, a partnership of leading U.S. manufacturers and their unions. “Manufacturing jobs contribute much more to the economy than service sector jobs. Congress and the Administration must take clear action to strengthen American manufacturing and enforce existing U.S. trade laws. Otherwise, more U.S. factories struggling to compete against illegal, subsidized competition from overseas will close and more American workers will lose their jobs.”