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Understanding the new economy

Why have the traditional manufacturing indexes become less useful in predicting the overall state of economic affairs? According to IMM’s Molders Economic Index analyst, Agostino von Hassell of The Repton Group, several molders have called to wonder why the U.S. economy is booming but manufacturing isn’t. The explanation is relatively simple, says von Hassell. The United States is completing a wrenching transition from a manufacturing society to an information and service society. In 1998, U.S. Department of Labor figures show that 80 percent of the U.S. work force—some 93 million people—don’t make things anymore. They provide services or work with information.

Over the past year, more than 400,000 U.S. factory jobs have been lost. Here is one example. In April, Tyco International Ltd., Hamilton, Bermuda, and Exeter, NH—now the top manufacturer of electrical connectors after its purchase of AMP Inc.—announced plans to eliminate 4000 AMP jobs in addition to 4200 cuts announced earlier by AMP. Why? While the electronics market is very strong, higher import levels have hurt AMP’s U.S. manufacturing operations.

So even though we are currently experiencing a modest resurgence in manufacturing, it comes on top of what now clearly was a recession in manufacturing that battered plants across all industries for much of 1998 and the initial months of 1999. The comeback is a positive sign, but not as indicative of the whole economy as it might once have been. But while all manufacturing in the United States was in a slump, injection molders overall managed to see some growth, although at slower rates than years past. A booming service economy means that consumer spending is up, and that bodes well for all molders.

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