Intro: There were three related and important manufacturing trends that emerged in 2011:
a) American manufacturing remained at the
forefront of the United States’ economic expansion for the second year
in a row and re-established itself as one of the economy’s strongest
sectors;
b) An erosion of China’s manufacturing cost
advantages, especially for wages, started to bring manufacturing
production back to the United States from China and other low-wage
countries, reversing a decade-long trend of outsourcing production
overseas; and,
c) An abundance of domestic shale-based
natural gas brought gas prices to record low levels and sparked a new
boom in the United States for energy-intensive manufacturing.
As a result of these trends, American
manufacturing in 2011 had its best year in at least a generation by all
relevant measures of economic performance: profits, output growth, and
employment gains. In fact, it’s possible that we will look back on 2011
as a watershed year that marked the beginning of a great manufacturing
renaissance in America.
Conclusion:
Putting it all together, the U.S. manufacturing sector had one of its
best years ever in 2011, reflecting a new manufacturing rebound that is
now underway and is expected to accelerate in the years ahead. Flush
with record-level profits, the manufacturing sector has never been
financially healthier than it is today, and the future of American
manufacturing has never looked brighter. After years of negative reports
about the decline of American manufacturing, it’s now time to recognize
and celebrate a great turning point, as America’s industrial sector
moves in a new direction that many are now calling a “manufacturing
renaissance.”
Cynics are going to look at the photo of the robotic arm posted in the article and conclude it won't mean any new jobs. :-/
ReplyDeleteManufacturing is a capital-intensive business that requires equipment, tooling and raw materials. For the renaissance to come to fruition, the manufacturers will have to turn to banks for the financing required to hire more workers, buy new equipment and aggressively market themselves - and hopefully acquire those loans.
ReplyDeleteNow if only we can get rid of President Downgrade (maybe the electoral votes from those extra 7 states can help...?), so that the uncertainty he's constantly introducing into the business cycle will fade, it should really take off in 2013.
ReplyDeleteManufacturing is a capital-intensive business that requires equipment, tooling and raw materials. For the renaissance to come to fruition, the manufacturers will have to turn to banks for the financing required to hire more workers, buy new equipment and aggressively market themselves - and hopefully acquire those loans.
ReplyDeleteIf those loans come from newly printed money the manufacturers will find their investments to be much more expensive than they planned on and a great deal of the investment will be wasted. Capital comes out of savings and on that front the US is falling behind. Now you could argue that foreigners will invest their savings in the US but that is a hard argument given the terrible regulatory environment in the US.
There will be many new jobs from the manufacturing boom...But first the manufacturers need to hire some PR firms to advertise these jobs as quality, high paying, rewarding jobs. Nobody says, "When I grow up I want to go into manufacturing". Hence, manufacturers hurtle is the workforce's perception not the reality.
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ReplyDeleteThere are ways of raising financing without bank loans: selling bonds, selling stock, diverting profits, etc.
ReplyDeleteA couple of comments speak of getting loans for new equipment. Will businesses turn to loans, or will they draw on the cash sitting on the sidelines? After all, businesses are sitting on $2T ($3T, by some accounts) cash. Why wouldn't they draw down on the cash reserves?
ReplyDeleteSitting on cash? The only way that you can sit on cash it to take it out of the banking system and put it in a mattress. When you keep it in the bank it is used to make loans that are a multiple of that amount of cash. If you put it in a money market fund it uses that cash to buy treasuries, corporate paper, etc. If you withdraw that cash interest rates will rise. Given the sensitivity of the economy to low rates that would cause stresses that cannot be handled easily.
ReplyDeleteAfter all, businesses are sitting on $2T ($3T, by some accounts) cash.
ReplyDeleteAnother myth tossed into the dustbin of history.
>>>>> Cynics are going to look at the photo of the robotic arm posted in the article and conclude it won't mean any new jobs. :-/
ReplyDeleteLOL, of course it won't. That's the entire point -- to shift the remaining percentage of manufacturing labor to other things, just as mechanization took the 80% of the ag labor force down to 2-5% of the labor force.
We should see the manufacturing sector reduce down to 2-5% of the labor force in the coming decades.
Are we wailing about the lost ag workers from a century+ ago?