Manufacturing Bust
President Barack H. Obama, if current trends continue, will become the first Democrat to preside over a net national loss in domestic manufacturing jobs since the Bureau of Labor Statistics started reporting monthly employment data in 1939. Seven percent of manufacturing jobs nationwide (873,000) have disappeared since Obama took office. By contrast, manufacturing employment expanded under Democrats Franklin D. Roosevelt, Harry S. Truman, John F. Kennedy, Lyndon B. Johnson, and James E. Carter. Even William J. Clinton, the first postwar Democrat to preside over a net loss of manufacturing jobs in the South, eked out a 323,000 nationwide gain during eight years in office. U.S. manufacturing employment under Clinton grew at an average monthly rate of 3,365 jobs. It would have to expand at an average monthly rate of 29,101 jobs from now through January 2013 for Obama to record a net gain, an unlikely proposition. Johnson was the last Democrat to preside over manufacturing employment growth that robust.
The largest industrial states have recorded manufacturing job losses under President Obama. These include California (121,000), Texas (62,400), Illinois (59,000), Pennsylvania (50,900), North Carolina (50,400), Ohio (46,400), Indiana (29,200), and Michigan (23,900). National manufacturing job losses under President Obama have been broad-based. Durable-goods industry sectors that have recorded job losses under Obama include wood products, nonmetallic mineral products, primary metals, fabricated metals, machinery, computer and electronic products, electrical equipment and appliances, transportation equipment, furniture and related products, and miscellaneous manufacturing. Non-durable-goods sectors that have recorded losses include food manufacturing, beverages and tobacco products, textile products, apparel, leather and allied products, printing and related support activities, petroleum and coal products, chemicals, and plastics and rubber products. No manufacturing sector has yet to record a gain.
Most incumbent Republicans lack the credibility to raise the issue. They were, after all, largely silent on manufacturing job losses under President George W. Bush. Manufacturing contracted by 4.5 million jobs under the Republican Bush, a 27-percent decline unlikely ever to be surpassed. The longest consecutive monthly increase in manufacturing jobs under President Bush was five months (December 2005 through April 2006). Obama has already exceeded that record in 2010, recording six consecutive months of small gains from January to June after monthly declines last year.
Most Republicans have listened for too long to economists who argue manufacturing job losses are unimportant as long as output expands. This argument overlooks countries like China, where manufacturing employment and output have both increased. It downplays the social consequences for families, including a greater government role as good-paying private-sector jobs disappear. It also ignores the political implications of long-term manufacturing job losses in a state such as Ohio, the key to the Electoral College. President Richard M. Nixon, the last Republican to preside over a net national gain in domestic manufacturing jobs, won Ohio’s electoral votes twice, as did Clinton. How will these Republicans assail Obama’s record to date in Ohio when nearly one in three manufacturing jobs (322,400) disappeared there under his predecessor?
Economists who defend President Obama’s economic policies argue he inherited an economy in recession and note that Bush also presided over a net loss of manufacturing jobs. But at some point President Obama’s economic policies, as they apply to the domestic manufacturing sector, will be judged on their own merit. And thus far under Obama, national manufacturing employment has declined to the level of spring 1941 (11.6 million), shortly before U.S. entry into World War II.
This article first appeared in the September 2010 issue of Chronicles: A Magazine of American Culture.
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A very good and very timely piece.
President Barack H. Obama, if current trends continue, will become the first Democrat to preside over a net national loss in domestic manufacturing jobs since the Bureau of Labor Statistics started reporting monthly employment data in 1939.
He does not care. The Drillig moratorium is proof. The economists who defend Obama's policies are a intellectual joke, especially anyone from Berkley.
This editorial puts a lot of weight on policy.
There is no less a notion in all of us that national incumbents are to be credited for booms and good times and national incumbents are to be credited for lean times and depressions. Whether good times or bad, leaders are to be credited for both. It's akin to how People's Republic of China takes credit for loss of life in earthquakes, because they can convince people that they are deities with the power to do the opposite.
Policy is not some wand, which if waved right, can make millions of people wealthier or poorer. Three hundred million Americans conducting billions of activities on a day to day basis comprise all aggregate commercial activity. Kennedy did not create their jobs and Clinton did not take theirs away. Their interference or non-interference may on margin make things a little worse or a little less worse, but it's not in their hands.
We can't create any simplified explanation of what caused loss of jobs and what caused creation of jobs - all historical events have hundreds of factors influencing it to a marked extent. In all, what can we say?
Question: We can’t create any simplified explanation of what caused loss of jobs and what caused creation of jobs – all historical events have hundreds of factors influencing it to a marked extent. In all, what can we say?
Answer: "
God Help us. Keep us from the trap they have set for us and from evildoers.
Let all the wicked fall, each into his own net, while we escape." Domine, clamavi ad te, exaudi me.!!!!
Liberal social engineering policies from FDR thru Obama are responsible for the current mess.
It would seem that Republican politicos like Karl Rove and Ken Mehlman prefer as voters IT workers with tastes for sushi, tweeting and driving Priuses rather than men who work with their hands making things, who hunt and fish and eat barbeque and drive pick-ups. One world is socially liberal and the other is socially conservative. It boggles the mind that Republican political mavens prefer the socially liberal world order of the IT geek.
"Karl Rove and Ken Mehlman prefer as voters IT workers.....rather than men who work with their hands making things, who hunt and fish and eat barbeque and drive pick-ups. "
Heck, even the young Hank Williams knew "A country boy can survive" --and vote!!
Mr. Sanjay, it's not that policy is a sufficient element in reversing the rapid decline of American manufacturing but it is a necessary one. That Germany, China, and Korea, to name a few examples, take this seriously and thoughtfully conceive industrial policy is doubtless instrumental, even if not sufficient, to their own manufacturing successes.
The problem is that we have people in power in many of our institutions - government, academia, and business - that have become convinced that manufacturing is unimportant and unworthy of a national policy. As such much of the public, which quietly allowed trillions to flow to the financial sector because the talking heads told them it was necessary, went ballistic over $60 million in loans to the auto industry these past couple of years.
It is becoming near impossible to explain to people that failed banks are easily replacable while a gutted manufacturing sector is not. It is even more difficult to explain to these same people that the R&D element and competitiveness across a host of so-called but widely misunderstood "high tech" sectors is at stake. That this has little to do with helping unions and more to do with national competitiveness and long-term (military and economic) security is regarded as a strange assertion no matter how much empiracal evidence emerges.
I am not convinced. Mr. Sanjay brought one valid point. But there are other considerations: It is not only because of the profits it is also because of productivity. Productivity has increased, so fewer workers are needed. Further, although manufacturing costs have declined, the cost of regulation have increased trumping these savings, thus outsourcing. Then there is innovation, Mr. Sowell has a nice story about Kodachrome today as to what happens because of innovation. Old ways of making things become obsolete and nowadays this also leads to fewer jobs.
The argument is being made that jobs can be saved via industrial policy. However, an argument for an extensive industrial policy ultimately always ends up as an argument for more regulation. Yes it would be nice for all the middle class people that were once prosperous to continue to do be so. But even if outsourcing was curtailed or prohibited, there would be a lot fewer people needed in manufacturing.
Even though the Repubs are more business friendly, it is uncertain that they would do any better than Obama. Ans as it was pointed out in a previous post, it may not make any difference who is in charge.
Any sort of public policy is extremely difficult to accurately propose, legislate, and then monitor for proper results. Fortunately, the Free Market always corrects for any problems, rendering public policy unnecessary. Oh, but wait! Free markets exist only in a realm of Platonic/Libertarian Forms, not in this Vale of Tears. What to do?
Well, I suggest some more careful thinking about what really needs to be accomplished. Many here on this thread, and elsewhere, are strong advocates of Efficiency. But, while nice, it is not really essential. Peter Drucker defined efficiency as "doing the thing right." Effectiveness was defined as: doing the right thing." In essence, effectiveness is leadership. All but the most blind can readily see that effectiveness is more important than mere efficiency.
For far too long, emphasis has been on efficiency, and this required eliminating jobs. (Except those in the ruling and financial elites, of course.) More work is done, and by fewer people. What is not to like? People out of work do not gain the benefits of being and feeling socially productive. They also do not make as many purchases, nor pay much in the way of taxes. By greatly diminishing employment, efficiency might be temporarily increased, but at eventually catastrophic costs.
Instead of trumpeting each increase in unemployment as a victory over inflation, as was done during the last Clinton Administration, much more careful policy work needs to be done in order to put as many people to work in productive and adequately paying jobs as possible. There are no simple ways of doing this, but it is an essential goal to regain effectiveness. Policy areas that may help might well be border adjusted value added taxes, duties on items imported from locations where environmental and labor standards are largely Satanic, and a cultural change where labor is valued, and speculation dropped down from the pedestal it has claimed under false pretenses.
Policy is a very blunt instrument, and it quickly gains adherents, so that when the original goals are not being met, it is still retained, and another poorly designed and monitored policy is inflicted along side it. Much of current public policy work assumes that people follow laws and regulations, so it is merely enough to make them an offer they cannot refuse in order to have a successful policy. This does not work.
Very good article Mr. Kraza.
Ohio has been hit hard, as this administration has continued to suck us dry. Reputable owners of various manufacturing companies have their hands tied. Even companies that have been in business 40+ years cannot expand nor obtain equipment leases because new financial laws have strangled them from obtaining any sort of business loan - - - owning your own facility and boasting excellent credit means nothing in the banking game these days.
On the flip, the June issue of our local "Crain's Business" reported that there are several major manufacturers that are actually starting to see a boom in production. However, there is new caveat to their dilemma: More and more people don't *want* to work.
One manufacturing company President admitted that he "can't find any people" on his own and must resort to using staffing agencies. Privately, these manufacturers also wonder if some of the people aren't "choosing to remain on unemployment compensation" rather than finding a job.
This administration's socialist philosophy (and the disintegration of society and work ethic in general) have equally contributed to the laziness and "government" dependency that has infected today's workforce. In essence, why work when unemployment benefits are so easy to obtain and keep getting extended . . . and extended . . . and extended? Very, very sad.
Well said, Greg.
I'm pretty certain small towns which become business-friendly will be the forward-thinking progressives. They must concentrate on luring returners and keeping people who are settling down with family. College is not for everybody, but working with tools will never go out of fashion.
@9 justine
Kodachrome is not gone, but it is indeed becoming more of an artistic medium. The same thing can be said about portraits in oils, any culture will value beautifully-made art. Well, I certainly hope so.
@11 SB
On a recent visit to east Cleveland, it seems to be that bad culture has rubbed off on good. A once stable Slovenian neighborhood has been overrun with the low IQ selfish and slothful. This must be tolerated and probably encouraged(unwisely) by local governments.
@S. B.
About people not wanting to work, there are reports across the Western world that businesses are having to put existing workers on overtime for the same pay and hire only temporary workers to keep their businesses running. The uncertainty during recessions has one small part to play in businesses being reluctant to put more people on their payrolls.
I don't know how things are there Mr. Sanjay, but there are a lot of lazy Americans both black and white. The Mexicans at least work. Unemployment is supposedly horribly high where I live but the local grocery store has had hiring signs up advertising $10-an-hour starting pay for cashiers (a trainded chimp could punch buttons on a cash register). Now if unemployment (those willing to work but unable to find a job) was that bad how come the store doesn't offer $7.25-an-hour and how come the jobs' have been up for grabs for awhile now. Americans don't want to take jobs that are "beneath" them but to me it would be much more shameful and embarrassing to leech of the government and sit home all day.
We know a lady at Church who lost her construction job awhile back. She is raising her toddler granddaughter now and doesn't want to go back to work and her husband makes a decent salary (nice house, they spend like crazy) but she collected unemployment anyway.
There's also ridiculous numbers of fat-Americans on disability.
@14 Prateek Sanjay:
"About people not wanting to work, there are reports across the Western world that businesses are having to put existing workers on overtime for the same pay and hire only temporary workers to keep their businesses running. The uncertainty during recessions has one small part to play in businesses being reluctant to put more people on their payrolls."
RESPONSE: To clarify, my post wasn't referring to these "booming" manufacturing businesses as being reluctant to put more people on staff, but rather their *inability* to find people on their own, hence, the use of staffing agencies.
Staffing agencies don't necessarily equate to "temporary," as many are also "permanent" and reputable third-party agencies *and* non-profits (very common in the rust belt) that specifically focus on manufacturing from entry to C-level. The article I referenced was for "permanent" full-time staff;-)
@ 15 / 16 Bruce
Hysterical.
Being fat is "disabled"?
That is so wrong. Just when you think small laws like these wouldn't be abused by petty opportunists, they end up being so.
There was a notorious case in UK of an entire obese family (mother, father, and two daughters) who received generous welfare, while condemning those who didn't work. Their claim on the welfare was that they were too fat to work, but also too hungry from being too fat to cut down or buy less food, and thus left too lethargic to either excercise or find work. Their $20,000 a month of welfare was just enough to buy them the large amount of food that they often finished in one sitting. I thought it was an unfortunate thing, and I am not even against people living on welfare.
John Stuart Mills, while an unextraordinary thinker, did once say that going too far with removing personal responsibility and freedom of initiative will result in a society of "cramped, warped, and hidebound human beings." For someone who was a utilitarian, this was the one moment where he thought that there was a deeper and purely human reason why the paternal and maternal state should be as small as possible.
Justine,
I would argue that change caused by productivity and innovation are nothing new to advanced/advancing economies. Agriculture in the 19th century is a great example. It takes far far less people to produce food and other agri-products but the sector reamins important to the national economy. Unlike Kodachrome which has been replaced by digital media, we still need corn, wheat, hogs, etc just as we will continue to need vehicular transport, refrigeration, etc.
It may be argued now that there is faster and cheaper shipping we can (and are) jettisoning these "obsolete" sectors. But I believe that economies of a certain size can and would be wise to maintain mature sectors even in their advanced stages. The reasons have more to do with advancing and owning/controlling technology which leads to more innovation and higher security (financial and physical). The argument about jobs, even if secondary, at this point in time is trumpped by this other concern. I say "at this time" because if unemployment gets high enough there will be such unrest that the concern will become primary because government(s) will be forced into action regardless of our political view on this....
I have listened to all sides with their various proposals but I have not heard one(proposal) that would bring decent paying manufacturing jobs back to America. Have I missed something?
Mr. Kincaid, you missed something. A border-adjusted tariff would do just this; bring jobs back. But, perhaps more important, it would ensure that firms inside the US control and develop valuable technologies upon which various sectorial growth and innovation will depend on over the long term.
Thanx Eagle. Where along in the legislative process is this proposal? Who are its sponsors? Where can I learn more about this.
Mr. Kincaid, unfortunately the political class in the US considers any border adjusted tariffing unaceptable to their vision of free trade (regardless of what our trading partners do). To learn more you can read some of Mr. Hartman's articles on this topic which are, I believe, available both in the print editions and some on this site from the past two years or so. Mr. Buchanan has also addressed the topic in his discussions of the economy.
I think we all should remember the flipside of what people here might be suggesting.
Any coddled industry tends to remain a coddled industry and never something more than that. We know this, because government-coddled railway companies were hit the hardest when other modes of transportation became more viable. Any coddled business can charge higher prices, for less quality, for servicing a smaller group, at a lower capacity. While many would consider small and half-empty trains running on the tracks of the most remote areas to be a waste of scarce capital, they'd be surprised to see that it still shows as windfall gains in their income statements, because they get 100% subsidies on every cargo or passenger serviced. They can afford to be wasteful with space and capacity.
Subsidies, cheap land, cheap supplies of utilities, and lots of low interest loans from state banks will only reflect in poorer, shabbier goods with greater prices. Domestic protection, even moreso. Even if all this is for the sake of the American worker, the same American worker is also the American consumer and if he has to pay more for the same, or pay the same for poorer quality, did he really profit? It doesn't do much for jobs anyway, since the business is encouraged to run at lower capacity.
Mr. Sanjay. I think the unused capacity in question here is the unused capacity in the American labor force. Although productivity is high in many industries, and America is certainly not completely bereft of skill, it appears that significant portions of the labor force are underemployed or without work altogether.
Unemployment and underemployment generate forces of apathy and addiction that further erode the capacity of the labor force. These are serious problems that will not be solved with simple retreat to free market principles. This is partially because of the near total establishment of vested interest in every important facet of the economy. While obliteration of the myriad protections accorded the vested interests (including environmental, labor, professional, and financial interests) might generate renewed capital and technical innovation, it is an improbable political event.
Americans are trying to work with what they have to create an economic outcome where a high proportion of the labor force is working at something better than 75% of their cerebral and physical capacity. To achieve this end, almost everything is on the table. Even the forbidden chapters of protectionist policy.
That's all I was saying, that the coddling of industrial policy itself doesn't create jobs, and it often discourages that, because under such coddling, factories don't run at full capacity, including capacity of man-hours.
Since we are already at protectionism, Patrick Buchanan's analysis is based on his chosen examples from history. Historical analysis suffers from confirmation bias (using and cherrypicking convenenient examples wherever one sees fit), narrative fallacy (assuming there to be a clear cut cause-and-effect between two historical events, even thoough any event has an unlimited multiplicity of causes), and unfalsifiability (like the people who defend lack of stimulus results by saying that enough stimulus was not given). And having read much of Mr. Buchanan's writings on it, he has unfortunately fallen to confirmation bias, narrative fallacy, and unfalsifiability. His attempt to blame the fall of the British Empire on free trade policies suffers from ignoring the simple fact that any Empire is expensive to maintain and it is much more expensive to adminster a rural colony than the developed domestic homeland. That's confirmation bias and narrative fallacy. It was also followed by unfalsifiability of saying that even if Britain was a little middle-of-the-road on trade, it was "more free trade" than others, even though Britain maintained its colonies through protectionism.
Any serious look at any policy can not retreat to confirmation bias, narrative fallacy, and unfalsifiability. It ultimately amounts to, "Says who? Says I!" style of argument. The problem is that Mr. Buchanan's attempts to look at empirical statistical data also suffers from the fact that Mr. Buchanan has no known grounding in statistics. Statistics are better left to those who have studied statistics and can interpret them, and statisticians themselves assert the limitations of given statistical figures more than what they supposedly reveal. If you had Series X that showed levels of tarriffs and Series Y showed industrial output across time periods, one can't show immediate correlation, because it takes time for the effects of tarriffs to come in. One may apply lag-and-lead correlation, but how does one determine the lag, and how can there be a constant lag across all periods anyway?
In India, we have the famous story of tenant farmers who dream about owning a farm one day, and what houses and cattle they'll keep on it. Then they get into disputes over who shall own and divide how much of that land if they ever get it, and then they start fighting, and when somebody asks, they shout "He wants my land." The stranger asks, "But what land and where?" In Europe, they have a saying, "When did you stop beating your wife?" to which one might respond, "I never had a wife" or "I was never beating my wife." Trying to make arguments on an issue, when the issue itself was never clarified is at the heart of the renewed international trade debate. Mr. Buchanan cites Russia and China's trade surpluses and America's trade deficits as an argument. He doesn't bother to assert whether the trade deficit ever was a problem in itself. The truth is that the danger from trade deficit is zero, because trade deficits have been seen in the richest and poorest nations of the world, and trade surpluses have been seen in the poorest nations of the world, and it is meaningless to assert whether the "deficit" or "surplus" is beneficial. As it is, Russia and China are much poorer and far more backward nations than United States, and the former two contain places with the worst and most unimaginable living conditions that have remained the same for decades. Are Russia and China really models for the US just because of one arbitrary statistical figure? If American businesses are offshoring to China and leaving the jobs in US, why is American manufacturing business capital investment in China not even $20 billion, while American manufacturing business capital investment in tiny Netherlands is at $80 billion? Dutch workers are paid far more than American and Chinese workers are - which hurts Paul Craig Roberts' theory of "Global Labour Arbitrage".
I think the debate on protectionism can sufficiently continue when we stop asking, "When did you stop beating your wife?"
I don't oppose the good sentiments of what modern day economic nationalists believe. I think they need to find some way to argue and analyse on the same higher levels that Stiglitz, Bhagwati, Mishkin,.etc do. I mean, hey, what if the protectionists are right?
Mr. Sanjay. Who is proposing Russia and China as models for the U.S? Citing manufacturing statistics from China is not equivalent to proposing China as a model for economic development, although it might suggest support for certain limited economic policies.
Statistical analysis is very interesting. But I believe in general there is not sufficient data of the quality necessary to "prove" the interesting economic models. And for various reasons, including the complexity and self referencing nature of the models, there never will be sufficient data.
The primary reference remains the individual. And individuals rarely use more than the most elementary statistics in their primary analysis. If individuals are convinced they are operating at far less than capacity, they will be inclined to support policies that offer at least a limited opportunity to expand their level of production. If sufficient individuals are convinced of this, they may become a viable political force.
I think this is the idea. You look for a block of talented individuals who appear to be performing under capacity. You offer them a deal. They get a chance to prove themselves. You offer them a boost if necessary. If they succeed, financial and social capital is accumulated, structures and institutions are established, and all is good. The subsidies may be considered insignificant initial investments.
If they do not succeed, perhaps at least the new movies will come with subtitles.
I agree. There is absolutely nothing there to mathematically prove anything because human activity is not like the behaviour of atoms and planets, and any amount of statistical data will be limited.
Those models and statistics can still be accepted as at least general casuitry, but to use them rush to any final conclusion can be oversimplifying and dangerous.
What you say about the primary reference being at a purely human level sounds like Austrian economics - they believe that any analysis can only depend on seeing what general human nature is, and working up from there. It's a kind of deductivism, where arguments about human purpose or intent is used as a starting point. Of course, people argue against it by saying that it looks at things in isolation and nothing exists in isolation.
Either way, most arguments for having international trade uninhibited are negative not positive. It's not that trade can guarantee positive results; it's just that there might be dangerous unintended consequences of any policy. Who knows if the solution could prove worse than the problem? Who knows if steel tarriffs end up hurting the domestic automobile industry?
It's a very different kind of ethical stand, where one suggests doing nothing, because doing something might make things worse for millions of people. It's a difficult stand to take, but many people - businessmen, politicians, academics, and even workers - have taken it, after years of frustration with how many promising industrial policies end up bringing more problems to them.
Mr. Sanjay. I believe that a fair amount of proposals currently on the table are meant to address inequitable allocation of the "fixed costs" of running America. The argument runs that it is very difficult for American manufacturers to compete with foreign based manufacturing entities who are able to avoid the burdens of environmental and industrial regulation, U.S. tax policy, tort protection, etc. Admittedly a nation such as the Netherlands probably also has high societal costs.
Of course an alternative to raising taxes (tariffs) on foreign manufactures is the reduction of fixed costs imposed on domestic manufactures. The political difficulty is that the fixed costs are in many cases also entrenched benefits. Reduction of these benefits would be firmly resisted by the beneficiaries. Hard choices would have to be made regarding which institutions should be cleared, and which should remain. Effective reduction of the fixed costs would impose real hardship on many, many individuals.
Well, I went over your post twice, and not knowing what to respond, I'll just say that we all don't have much of answer to this problem.
It's been said that structural unemployment is the least in anybody's hands.
I have faith in the ability of man to find resources to recover initiative, once he has given up on assistance from the usual sources.
Mr. Sanjay, it strikes me that you are falling into the confirmation bias and narrative fallacy trap here moreso than Mr. Buchanan. You seem to be supposing that protective tariffs are "coddling" certain industries. There is a great deal of judgement that would have to go into it, but properly erected tariffs would ensure technological and labor content in domestic markets but substantially better technologies should trump the resulting comparative higher prices. But we have the worst of both worlds. No tariffs to secure technological progress at home but all the coddling of other counter-productive government meddling of what Mr. Templeton accurately describes as a dominance by vested interests. Take the car industry for one example. Why should a powerful dealer lobby be able to prevent the direct sale of vehicles to consumers? Can you imagine if a lobby of electronics retailers would arise and prevent Apple and other electronics firms from selling iPods and MP3 players over the Internet? The dealers get rich regardless of whose cars they sell, yet the domestic dominance in automotive technology and innovation erodes precipitously. A textbook case of government acting in a corrupt manner on behalf of a vested interest while undermining the potential of the domestic productive sector overall.