Excellent article – US Manufacturing Is Not Dead

US Manufacturing is alive and well. The real issue is manufacturing employment, which is dropping like a stone. And the reason for the drop is an increase in productivity.

Read the entire article… or skip to the end…

Here are some general conclusions.

1.) The US still manufactures goods. In fact, the US still manufactures plenty of goods. Take a look at the types of exports in the latest trade data from the Census. It includes exports of industrial supplies, capital goods, autos and consumer goods.

2.) While outsourcing does happen — that is, companies do go overseas to open new factories at the expense of US employees — it is not the primary cause of manufacturing job losses.

3.) Going back to the recent post on employment remember that in this recession the unemployment rate of specific groups was heavily influenced by education level. In fact, according to the BLS, higher education levels (college graduates and above) were remarkably untouched in the latest recession while lower education levels (high school graduates, high school with some secondary education) had higher rates of unemployment. Lower levels of education are typically associated with manufacturing and construction employment — the two areas of jobs that account for the largest percentage of job losses in this recession.

US manufacturing would be greatly helped by two developments.

First, China needs to float its currency. A country that has 10% GDP growth but little currency appreciation is obviously manipulating its currency’s value to a high degree. Given China’s growth rate, investors should be flocking to China driving up the yuan’s value. That is not happening. A real free-floating currency would cure a lot of the trade deficit problems.

Secondly, there have been calls for a US industrial policy — that is, for Washington to essentially “pick winners and losers” by promoting some industries that they feel have a high probability of success. Asian countries have been doing this for years with remarkable success and it is a policy which we clearly need to copy. I’m a big promoter of nano-technology, alternative energy and stem cell research, but those are just my choices. There are plenty others out there that would also make sense.