Don't believe what you read: The manufacturing economy is flatlining

November 09, 2015

A few months back, I wrote a blog on how we're discovering that the emperor has no clothes. It appears that many in the government haven't discovered that yet, and are still excited about non-existent economic success. For example, many media outlets were raving about the "271,000 net new jobs" in October, but what they missed was that none of these were in manufacturing.

"Seasonal hiring" has begun. Everywhere I look when I head to the mall and to various retail outlets there are "help wanted" signs. If you need a short-term, part-time job in the retail sector selling stuff to people eager to buy stuff, you're in luck. Not so much if you are looking in the manufacturing sector. While there are job openings in manufacturing, most are for specific skills, and that's the kicker.

The Alliance for American Manufacturing (AAM) posted a press release last week noting that manufacturing flatlined in October. That means the #AAMeter, which tracks President Obama's promise to create one million new jobs in his second term, remains at +370,000. AAM President Scott Paul commented on this dreary statistic: "Underneath the euphoria over a good topline employment number is this fact: Manufacturing hasn't gained a single net job since January. That's terrible news for our economy. The effects of China's industrial overcapacity can be seen in waves of layoffs in American steel, aluminum and other manufacturing sectors. This weakness in factory hiring comes at a very inconvenient time for the proponents of the TPP (Trans Pacific Partnership), which analysts predict will widen our record manufacturing trade deficit."

Economist Alan Tonelson, who writes a blog he calls "RealityChek," notes that this "10-month stretch" of absolutely no job gains in manufacturing "qualifies as a recession, and no doubt stems from the production recession in which industry is also mired." He also notes that "total non-farm employment hit a new all-time low of 8.63%." And manufacturing wages aren't all that hot, either, rising "sequentially by 0.19% in September. Year-on-year, however, the 2.29% increase in inflation-adjusted September manufacturing wages was somewhat lower than the private sector's 2.32%."

One contributing factor that I've noticed is continued M&A activity. Many larger manufacturers are sitting on a pile of cash, which makes strategic and financial buys look really attractive. But these mergers and acquisitions often lead to structural consolidation. For example, when Kraft Foods Group completed the acquisition of H.J. Heinz last summer, everyone (mostly shareholders) applauded. Yet last week, Kraft announced the closure of seven manufacturing plants in the United States and Canada, along with layoffs of 2,600 people. Hardest hit will be Madison, WI, where a century-old Oscar Meyer plant that employs 700 production workers will be closed.

Well, it's a good time of year to get laid off, given that "seasonal" work is now readily available. The former Heinz workers can sell flat-screen TVs at Best Buy or toys at Target. The only question now, given the dismal jobs numbers, is: Who will be buying all this stuff?

Few government number crunchers and even fewer media outlets are able to see the impact of zero growth in manufacturing jobs. It's as if our manufacturing economy has become invisible.

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