Suzy Khimm had a nice post about the troubling manufacturing industry. According to her research “Manufacturing output rose just 0.5 percent in August — a 3.8 percent increase over the previous August, but a sign of weakness overall. The output of consumer goods was even weaker, at 0.2 percent, partly helped by a 1.7 percent increase in output from the auto industry.” This comes on top of the news today that China is playing a bigger role in digging up rare materials that are needed for the new compact fluorescent light bulbs, and the batteries we want to put into cars. While this makes for a good story, and we do need to make sure we do have a manufacturing base in the U.S., it is certainly not time to hit the panic button just yet.
One of the reasons why we hear stories about businesses sending jobs to China is because it is cheaper to produce the small materials, like the toys in McDonalds happy meals, overseas. But for bigger items like cars or air conditioners, it is still cheaper to assemble them here, mainly because of shipping costs. Of course, this does not make the stories about small towns losing their economic base any less compelling. While there have been plans implemented in order to retain jobs in the cities that have lost their factories, such as bringing in sports franchises, building downtown amenities a long with office parks, and creating businesses (particularly around the sciences) in Universities in the area, have proved to be effective in boosting local economies. But these are usually high skilled jobs that require training and a large investment (but don’t call it a stimulus!). In some cases, like in upstate New York, startup companies were grown after students their received degrees in computer science.
It is also important to note that manufacturing around the world, including China, has slowed. According to the New York Times “In the euro area, the purchasing managers’ indexes showed that manufacturing contracted for the first time in almost two years in August, echoing earlier data from South Korea and Taiwan, where new export orders fell sharply.” When it comes to China “although China’s official P.M.I. rose slightly, its first increase since March, it also showed the effects of slowing demand in Europe and the United States.” There are certainly things we could do to bring more manufacturing jobs in America. It might be lowering taxes, but incentives are usually the best way to go, which are included in President Obama’s jobs bill he is pushing right now.
It is also important to note that the United States is still the world’s largest manufacturing economy. According to the National Association of Manufacturers, the U.S. produces 21 percent of global manufactured products. China is second at 15 percent and Japan is third at 12 percent. That would make U.S. manufacturing the 9th largest economy in the world producing $1.6 trillion each year.
Do we have to change the way we are creating jobs, and incentivize entrepreneurs to create small businesses, of course. But we are by no means missed our chance to do so, and we are not falling behind as much as it may seem. While time is not on many families side right now, that is what it is going to take to get the economy fully going again.
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