Following Up: Events Keep Vindicating Trump – & Discrediting Obama – on Asia


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President Obama has grown fond of insinuating that presumptive Republican presidential nominee Donald Trump is largely responsible for much of the turmoil or instability spreading throughout major world regions. And as recent Asia-related events keep demonstrating, it’s Trump that has a much better handle on these challenges than a president whose response is little more than whistling in the dark.

Mr. Obama has just continued his attacks on Trump’s foreign policy remarks at a press conference held at a summit in Japan of the leaders of seven of the world’s largest economies, telling reporters that world leaders are “rattled” by Trump, “and for good reason….a lot of the proposals that he’s made display either ignorance of world affairs or a cavalier attitude or an interest in getting tweets and headlines instead of actually thinking through what is required to keep America safe.”

Given the Asian setting, the president – and those world leaders expressing these fears – surely had in mind Trump’s indication that the United States might be better off letting America’s allies in the region (namely Japan and South) provide for their own security, even if that entails developing nuclear weapons.

As I’ve repeatedly written, if implemented, Trump’s suggestion would indeed represent a sea-change in a regional and global strategy pursued by the United States since the end of World War II. But as I’ve also repeatedly written, for all the alarm they’ve expressed about Trump’s comments, Japan and South Korea are already showing signs of determination to develop their own nuclear forces.

The reason? Because Chinese and North Korean nuclear capabilities have become so formidable, that American promises to defend Asian allies with nuclear weapons if necessary now create the risk of exposing the U.S. homeland to nuclear attack. And as a result, the Asians have understandably lost a lot of faith in these American commitments.

Luckily, Mr. Obama will be in office only a few months more, because these developments and dangers seem to be news to him. But recent events are reminding once again that America can’t afford its next leader to be this clueless. For signs keep multiplying that Washington is rapidly losing the ability to solve this problem by knocking out these Chinese and North Korean nuclear weapons in a preemptive strike.

For example, even as the president was trashing Trump, Britain’s Guardian newspaper was reporting that China – as the U.S. Defense Department has long expected – is on the verge of sending its nuclear missile submarines sailing throughout the vast Pacific Ocean. This matters tremendously because submarine-launched missiles represent a country’s best bet for a secure nuclear deterrent – i.e., nuclear weapons that an enemy can’t knock out before they’re launched or at any point during a nuclear conflict. As a result, they present that enemy with a virtual guarantee that initial nuclear attacks (like those Washington is pledged to launch to protect its Asian allies) will provoke equally destructive retaliation, and therefore make those initial attacks much less likely.

Submarine-launched missile capability per se is nothing new for China. But so far, its effectiveness apparently has been hamstrung by the fact that Chinese subs operate noisily enough for the United States to track them, and by the limited ranges of these vessels, which have made their discovery even less challenging. Moreover, the nuclear-tipped missiles carried by China’s subs still can’t fly far enough to hit American targets unless fired from mid-Pacific locations.

It seems that these problems haven’t been completely solved, but according to The Guardian, Beijing feels that enough progress has been made to be actively planning deep ocean voyages for the subs sooner rather than later. And whatever ongoing and future advances are made on vessel range, missile range, and noise will mean that China’s nuclear submarine force will have more and more of the vast Pacific to hide in and attack from. So an American president believing that nuclear threats can keep China at bay in, say, a South China Sea confrontation, may wind up having his or her bluff called.

North Korea’s nuclear forces may have passed a critical threshold, too, according to an analysis by the consulting firm Stratfor – which is bad news for the United States and all of Northeast Asia given major questions about the rationality of its leader, Kim Jong Un. Stratfor recently examined the question of whether U.S. Military forces could destroy Pyongyang’s nuclear force if need be, and contended that the requisite American firepower certainly exists. But it also pointed to two crucial complications:

First, we simply do not have a comprehensive or precise picture of the North Korean nuclear program, especially when it comes to the number of weapons and delivery vehicles — we do not know for sure where they are located or how well they are protected.

Second, we have no way of knowing just how good the U.S. intelligence picture really is when it comes to the North Korean nuclear program. Predicting the likelihood of a U.S. strike is difficult to do when the decision to carry out an attack would depend heavily on the degree of confidence the United States places in its intelligence.”

Stratfor’s overall conclusion: Because the North’s forces are likely to grow in numbers and sophistication, unless U.S. leaders use their own nuclear forces in an strike, “the United States and its allies are already at a point where they cannot guarantee the complete removal of the threat of a North Korean nuclear attack.” And as a result, Washington can no longer guarantee that American territory will remain unscathed if a conflict with the North goes nuclear.

President Obama seems determined to pretend that the dangers created by these developments for U.S. national security simply don’t and can’t ever exist. Judging by her dismissive comments, likely Democratic presidential nominee Hillary Clinton – his former Secretary of State – seems to agree, Trump is facing up to this news and its full implications. And he’s the dangerous one?

(What’s Left of) Our Economy: Why the Big Media Really Don’t Get It


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Just when you think that the Establishment Media is almost totally hopeless when it comes to reporting on the economy, someone new (at least to me) comes along to restore at least some faith in Big Journalism.

The reporter in question is Sarah Kendzior, and one of her latest pieces stunningly explains one of the biggest frustrations experienced by so many Americans when they read its coverage of economic issues: why major new organizations keep talking up an economy that has failed so much of the nation’s population.

Kendzior’s work has documented and quantified an explanation that many of us have long suspected but couldn’t demonstrate conclusively: “For one thing, pundits and politicians are unlikely to work in the regions where most Americans live.” More specifically, journalists are found in those relatively few big American cities that have, on the whole, enjoyed surging prosperity even as most of the rest of the country has experienced sagging fortunes at best.  And their isolation from Main Street America keeps growing.  As Kendzior has found:

In 2004, one out of eight journalism jobs was based in New York, Washington DC, or Los Angeles—a high number even for that era. By 2014, that number had changed one of every four, even as the cost of rent in those cities rose astronomically, and the number of unpaid and low-paid positions exploded. This has led to journalism increasingly becoming an occupation of elites, with the reporters of the rest of the country underrepresented and the concerns of their communities underreported.”

This piece by Kendzior makes another economic argument that deserves a lot more attention: The geography of prosperity looks set to become even more highly concentrated going forward. Why? Because the yawning and expanding gap between living standards outside these islands of affluence and living costs inside them is preventing talented American from moving to cities and utilizing their abilities to the fullest. To quote Kendzior again:

[T]he talent of the heartland is wasted as job-seekers from these regions remained trapped. For millennials, many of whom are saddled with massive college debt and are expected to complete unpaid internships, the situation is particularly dire. Moving to the city where their field is located can prove impossible without family wealth. Careers are ending before they have the chance to begin.”

Kendzior’s analysis makes clear that this disheartening trend will be generally neglected by this elite media, too. But her own work encouragingly indicates that such developments won’t be ignored quite so completely, and I’m looking forward to more of it.

Im-Politic: GE’s New Gift to the Trade Populists


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The maverick presidential campaigns of Donald Trump and Senator Bernie Sanders just got a major boost from an unexpected source: General Electric CEO Jeffrey Immelt.

Throughout this political year, the presumptive Republican nominee and the Democratic challenger have drawn scorn from the nation’s intertwined political class and business establishment for promising voters that their administrations will bring back to America significant numbers of manufacturing jobs that have been lost to foreign competition. But in a speech last Friday, Immelt (unwittingly, to be sure) made clear both that their ambitions are eminently realistic, and that his own giant company plans to adjust its production and employment policies in response to just these “protectionist,” “populist” pressures – which he noted are appearing all over the world.

Immelt’s apparent tone and much of his phrasing indicates that he intended his remarks – to the graduating class at New York University’s business school – as a ringing defense of GE’s contributions to both the U.S. and world economies so far; as a grim warning that shortsighted, misguided fears about the costs of trade liberalization and global integration were about to endanger the much greater good done by these developments; and as a defiant declaration that his company was positioned to thrive come what may from the world’s cowardly politicians.

Let’s leave aside for now his claims about the net effects of GE’s operations and about today’s version of globalization – although once more he provided a specific number for GE’s annual exports without revealing how much the company imports into the U.S. market. What was actually most remarkable about Immelt’s speech was how strikingly it contrasted with the picture of U.S. multinational companies that’s emerged and prevailed especially since the debate over the North American Free Trade Agreement (NAFTA) more than 20 years ago ushered in the current era of American trade policy.

As Americans and their leaders have constantly heard throughout this period, corporations – especially gigantic ones like GE – had become completely liberated from specific locations and their political authorities. Thanks to dramatic breakthroughs in transportation and communications, these firms could establish any kind of operation anywhere in the world that created a favorable business climate. And if any retrograde national governments tried to interfere, executives could flip them the bird, pick up stakes, and condemn their unfortunate citizens populations to isolation and impoverishment.

The resulting policy conclusion that the multinationals and their mouthpieces in politics and the media obviously have tried to reinforce is that the form of globalization that was emerging is inevitable – a product of progress itself – and that nothing would be more foolish and futile than for the public sector to get in the private sector’s way.

My book on globalization exposed these claims as nonsensical. My research – conducted back in the late-1990s – showed that even the leaders of smallish countries, notably in prospering East Asia, routinely established conditions on in-bound foreign investment from the multinationals as a matter of course. And when faced with requirements to share technology with local partners or use certain levels of domestic content or export specific percentages of their output, the companies routinely complied. And as has just been reported today, these practices are still standard operating procedure the world over.  

The only important economic power that has failed to use its leverage has been the United States, which is why its approach to globalization was forcing its citizens into a “race to the bottom.”

So it’s crucial to understand that what Immelt was telegraphing to his Friday audience was not only that the American political system seemed likely to present the multinationals with comparable requirements, but that GE, for one, had no choice to comply. In his words:

[T]he globalization I grew up with – based on trade and global integration – is changing.

As a business leader, it is difficult to decide when to defend the old way (what you were taught) or when to change based on what you see.

With globalization, it is time for a bold pivot….In the face of a protectionist global environment, companies must navigate the world on their own.

We must level the playing field, without government engagement. This requires dramatic transformation. Going forward:

We will localize. In the future, sustainable growth will require a local capability inside a global footprint. GE has 420 factories around the world giving us tremendous flexibility. We used to have one site to make locomotives; now we have multiple global sites that give us market access. A localization strategy can’t be shut down by protectionist politics. …

We will produce for the U.S. in the U.S., but our exports may decline. At the same time, we will localize production in big end-use markets like Saudi Arabia. And countries with effective export banks, like Canada, will be more attractive for investment. ”

And if GE perceives no choice but to reply “How high?” when governments say “Jump!” it’s likely that similar firms will respond similarly to more demanding American trade policies.

With his suggestion of fewer GE exports, Immelt clearly hopes to convey the idea that although GE may weather this policy storm just fine, Americans as a whole won’t – and that therefore the populist candidates’ promises about returning jobs and achieving other economic gains will backfire big time if they’re kept.

But iron global economic realities have always meant that the main beneficiary of less globalized, more localized production patterns will be the United States. For how many other economies have the scale to support the manufacture of hi value industrial products – like those in which GE specializes – without needing major access to export markets? Obviously, the answer is “Not many.”  The number of economies with the scale to support such production without exporting to the United States is even smaller.

That’s why Immelt’s vow to “localize production in big end-use markets like Saudi Arabia” is so manifestly un-serious. Saudi Arabia isn’t nearly big enough for GE to profit by producing, say, jet engines or turbines for power plants in the kingdom solely for the kingdom. Canada, which his speech also mentioned as an attractive future location for investment, doesn’t qualify, either – despite its “effective” export financing bank. After all, as Immelt has explained, in a world of increasingly localized production, export possibilities by definition shrink substantially.

As for India and China, also touted as ever more important centers of future GE output, the still super-low incomes of their populations will prevent companies like GE from enjoying the kinds of pricing power and margins that remain essential for justifying servicing only those national markets with domestic factories.  To be sure, individual companies might figure out the necessary formula. But even after several decades of record-setting growth, China still needs to export desperately – which explains why such success won’t be possible for most firms.

So whenever you hear or read some self-appointed expert insist that job reshoring promises are simply cynical political pandering exercises, keep in mind that not only do Trump and Sanders disagree. So does one of America’s biggest industrialists.

Those Stubborn Facts: On TPP, Down is the New Up for U.S. Chamber

TPP “Would Rev the Engine of America’s Automotive Small [Parts] Businesses”

U.S. Chamber of Commerce, May 20, 2016

Projected TPP impact on U.S. auto parts output: -0.3%

U.S. International Trade Commission, May, 2016


(Sources: “How TPP Would Rev the Engine of America’s Automotive Small Businesses,” by J.D. Harrison, International Trade and Investment, U.S. Chamber of Commerce, May 20, 2016, and “Table 4.4: Estimated effects of TPP on U.S. output, employment; and trade: Changes relative to baseline in 2032,” in U.S. International Trade Commission, Trans-Pacific Partnership Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors, Publication Number: 4607, Investigation Number TPA-105-001 (Washington, D.C.: U.S. International Trade Commission), )

Im-Politic: Speech Transcript Shows China Lobby’s Still Got a Friend in Bill Clinton


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Politico‘s Annie Karni has just gotten a very important scoop with potentially major implications for this year’s presidential election. She somehow got a hold of a transcript of one of the recent speeches that one of the Clintons has given recently to corporate groups in exchange for a handsome ($285,000 in this case) fee.

No doubt, the story will be seized upon by anyone engaged in or following presidential politics for the evidence it provides about questions that have been asked throughout the campaign: Why do businesses – especially big businesses – pay so much to listen to the Clintons in private? What do the former president and his presidential candidate spouse generally tell these corporate leaders behind closed doors? By extension, are the Clintons working to with these companies and industries to advance their agendas? If so, how energetically?

I found this transcript important for a related, but somewhat different, reason: what it reveals about Bill Clinton’s views nowadays about China, which has been an awfully high profile issue in the 2016 elections. Specifically, it sends a clear message that if voters expect a President Hillary Clinton to respond more effectively than her recent predecessors (including her husband) against Chinese economic and national security challenges, they’d better hope that she keeps the new First Gentleman as far out of the policy loop as possible. Because judging from this transcript, his views on the PRC are as dangerously unrealistic – if taken at face value – than when he occupied the Oval Office.

The transcript presents the remarks made by the former president at a “China-U.S. Private Investment Summit” held in Austin, Texas in March, 2015. The event described its purpose as “[bringing] together 50 Chinese Investor Delegates with over 300 US project sponsors, policy makers, entrepreneurs, trade associations, economic development groups, and professional service firms for the most important bilateral engagement program of the year” to “support the public interest through cross-cultural private investment” by deepening “understanding on the human motivations, market trends, deal models and structures, and key areas for growth in the coming year.”

Translation into plain English: It was a gathering of Americans trying to make money by doing business in China, and Chinese trying to promote their country’s investment in America. Nothing inherently wrong with the first aim (although in practice it has too often resulted in the offshoring of valuable American production, technology, and jobs). That second objective, though, is much more problematic, both because China’s government exercises complete effective control over all aspects of China’s finances, including the channeling of capital abroad; and because no one has ever adequately explained why expanding the U.S. footprint of a communist economic system benefits the U.S. economy on net in either the short run or the long run.

And some essential context: As Karni reported, the speech took place a bare two weeks before Hillary Clinton declared her candidacy for president. Indeed, she “was already scouting campaign office space….” As Karni did not report, however, the United States and China at the time were neck deep into negotiations to conclude a Bilateral Investment Treaty (BIT) that the Austin attendees obviously supported strongly, but which is bound to encounter strong opposition whenever it’s submitted to Congress. So it’s anything but unreasonable to suppose that the conferees viewed their payment to Bill Clinton as a great way to boost the odds that a Hillary Clinton presidency would fight for the agreement. (The Wall Street firms that have paid comparable amounts for her speeches love the BIT, too.)

Moreover, given the controversy the BIT is bound to spur simply because China policy has become so contentious, it’s noteworthy that Bill Clinton’s speech mentioned virtually none of it. Nothing about job loss due to offshoring and Chinese protectionism, nothing about the tightening squeeze Beijing is placing on U.S.-owned firms that are invested there, nothing about multiplying Chinese cyber-attacks on American targets, and scarcely anything about China’s intensifying challenges to declared American national security interests in the Asia-Pacific region (which at one point he seemed to attribute to “the rise of Japan” under its current nationalistic Prime Minister Shinzo Abe).

In fact, the former president set the tone art the very beginning: “[W]e all know what the problems are, but I want to talk about the opportunities and why I think it’s so important that you’re here.”

As implied above, Clinton’s appearance at this meeting sent the at least equally important message to the conferees that “he was here” – for them. But his determinedly rose-colored-glasses view of U.S.-China relations and their upside also arguably served another crucial purpose: morale building.

After all, surely Clinton’s audience knew better than most how troubled U.S.-China relations are. And surely Bill Clinton knew that as well. As a result, chances are, like everyone who has a stake in preserving the China policy status quo, these American investors in particular were feeling pretty discouraged even back then, since their road to success had become so much rockier.

As a result, whether or not they believed their own propaganda about possibilities for cooperation or not, the Austin attendees surely needed their spirits lifted. For even many who recognize themselves to be greedy and shortsighted often need reassurance that they’re genuinely devoted to seeking the greater good despite all appearances. It will certainly take the sting out of writing the new series of checks to American lawmakers that any upcoming BIT lobbying campaign will require. And who better to deliver this feel-good message than an engaging, popular former president?

It’s also entirely possible that the emotionally needy Clinton needed to convince himself again that his own China policies, which are now coming under such fire, ultimately advanced the Lord’s work. So much the better to get paid megabucks in the process.

(What’s Left of) Our Economy: Looks Like Obama Aide’s Conceding a Major TPP Argument


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Compelling evidence just appeared that the Obama administration is conceding that many critics are right to call its Pacific Rim trade deal is a nothing-burger economically – at best. It came in the form of U.S. Trade Representative Michael Froman’s official comment on the new, Congressionally mandated U.S. International Trade Commission (USITC) projection of the deal’s economic effects.

The USITC did a good enough job pouring cold water on the notion that the Trans-Pacific Partnership (TPP) would be a major boon for the American economy. As has been widely reported, the Commission forecasts that the impact on the nation’s growth and real incomes is statistically insignificant.

These findings logically challenge critics’ descriptions of the deal as disastrous. But at the same time, the USITC assumes full compliance with the TPP’s terms by the eleven non-U.S. signatories. As I’ve explained, even if Washington performed a dramatic about-face and treated trade monitoring and enforcement as a priority, logistical and political barriers mock the belief that the United States can hold its TPP partners’ feet to the fire.

Indeed partly because its methodology can’t adequately take such problems into account, the USITC has a long and sorry track record of greatly understating the net harm to the American economy from new trade agreements.

But Ambassador Froman’s strategy for handling the USITC report strongly indicates that President Obama has decided to gloss over the claim that his aides did a great job at the TPP talks. For the U.S. Trade Representative evidently has decided to change the subject.

Froman did make some token stabs at portraying the TPP’s terms as economic winners for Americans. For example, he took the time-honored official Washington tack of touting export projections while ignoring predictions for imports (which globally would be greater according to the USITC) and thus the net economic impact of trade flows.

Yet Froman quickly exited this specifics-oriented economic debate and pointedly contended that What cannot be quantified in this study or any other is the cost to American leadership if we fail to pass TPP and allow China to carve up the Asia-Pacific through their own trade agreement.”  

Unfortunately for him and the president, this position puts them on no stronger ground. On the one hand, after all, Froman is implicitly conceding that any set of TPP provisions to which the United States agrees is better than none because simply signing the treaty creates an American seat at the Asia-Pacific rule-writing table. On the other hand, as I’ve repeatedly noted, expectations that such American participation will create even longer-term benefits is laughable for at least four main reasons.

First, most of America’s main regional allies – and most major TPP signatories – are already taking part in those Chinese initiatives that Froman describes as so hostile to American interests. These initiatives include not only China’s new Asia infrastructure bank, but its Regional Comprehensive Economic Partnership – its explicit counterpart trade agreement.

Second, the United States itself has given its blessing to another Chinese-backed regional trade scheme – a proposed Free Trade Area of the Asia Pacific.

Third, these Chinese measures have attracted such regional support largely because so many East Asian countries in particular (as opposed to TPP’s Western Hemisphere members) pursue the kinds of Chinese-style trade and broader economic policies that the administration has long noted have undercut U.S. Domestic economic interests. Regardless of the piece of paper they have signed, the last thing these neo-mercantilist powers want to see is an enforceable set of “rules for trade” that reflect America’s more free-market-oriented values and practices.

Fourth, because U.S. and Asian definitions of acceptable and unacceptable economic behavior contrast so strikingly, even sitting at the TPP table can’t possibly guarantee pro-American results – unless the TPP’s dispute-resolution mechanism breaks with all recent precedents and awards outsized authority to the United States, as opposed to operating on consensual, or one-country, one-vote, principles.

Not that Froman or the rest of the administration are running out of arguments yet. They could refocus the debate on the national security claim that TPP is essential for preserving and/or strengthening America’s geopolitical position in the Asia-Pacific region, especially as China’s power and influence surge (even though this administration has done little at most to stem the flow of defense-related technology and valuable economic wherewithal to that same China). They could also warn that President Obama’s international credibility will be undercut if TPP is rejected (even though his presidency is nearly over).

Wouldn’t it be much better if Mr. Obama and his aides just threw in the towel, admitted that despite decades of experience, neither Democratic nor Republican administration’s have figured out how to negotiate trade agreements that work for America on net, and if the next president spent time and resources developing a learning curve instead?

(What’s Left of) Our Economy: TPP Endorsed – by a Bush-ie!


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One of the most obvious and most important developments of this jaw-dropping presidential campaign so far has been put succinctly by conservative talk-show host and editor-in-chief Laura Ingraham: “Bushism is over.”

So now that even Republican and conservative voters have decisively rejected the politics and policies of the two Presidents Bush, who does the Wall Street Journal editorial board trot out to make the case for the new Pacific Rim trade deal Congress may soon consider? Archetypical Bush-ie Robert B. Zoellick.

But the choice of Zoellick isn’t only weird politically. It’s weird substantively. For although Zoellick’s government posts include serving as U.S. Trade Representative under George W. Bush, it’s hard to find the evidence that he knows anything about crafting trade policies that strengthen America’s economy, or about the theme of his May 16 article – the Trans-Pacific Partnership’s (TPP) alleged potential to help respond to national security challenges posed by China in the Asia-Pacific region.

After all, when it comes to trade policy generally speaking, Zoellick is the fellow who:

>during his four-year trade negotiating (2001 through 2004) stint saw the U.S. overall trade deficit shoot up by more than 56 percent;

>during his USTR tenure saw the U.S. non-oil goods deficit – the portion of American trade flows most heavily influenced by policy – jump by more than 48 percent;

>pushed a Doha Round global trade agreement expressly designed to benefit developing countries more than the United States; and

>established as his highest sub-global trade liberalization priority a deal with Central American and Caribbean countries whose total economies were no bigger than that of New Haven, Connecticut.

Nor can anyone call legitimately Zoellick’s foreign policy chops impressive, especially regarding China. He’s the fellow who:

>thought it was realistic to turn China into a “responsible stakeholder” in world affairs and the global economy;

>during his stint as chief U.S. trade policymaker, saw the United States transfer more than $472 billion in wealth to China in the form of cumulative trade deficits, which of course contributed to China’s economic and military strength;

>has said nothing about massive transfers to China of defense and cyber-security-related technology by U.S. multinational companies either while he served in George W. Bush’s administration or since then.

Zoellick’s article helps explain why American voters’ decision to kill off Bush-ism was amply justified. Its publication, however, shows that Bush-ism’s fatal flaws are still news to one of the nation’s major news organizations.

(What’s Left of) Our Economy: Real Wages Still Look Really Soft

Although the U.S. government may think it’s efficient to release updates of several key measures of U.S. economic performance on the same day, it sure doesn’t make my job any easier. But since it’s not about me, not only did we get the new (April) industrial production figures today, we got the April real wage statistics, too. And they’ve made it even more difficult to use the words “wages” and “inflation” in the same affirmative sentence.

According to the Labor Department, inflation-adjusted wages for the entire private sector fell on month in March. The decrease was only 0.09 percent, but the dip was the first since last June. The January and February figures were revised only fractionally, and left the recent picture unchanged.

As always, however, it’s the trends over longer period of time that really count, and this is where wage inflation claims keep getting ever sillier. The new Labor data (which are still preliminary, as they are for March) put year-on-year April constant dollar wage increases at 1.33 percent. That’s less than the March annual gain (1.52 percent) and the February advance (1.41 percent), though it did beat January’s 1.14 percent.

More important, the new April year-on-year increase was barely half that of the previous two Aprils (2.53 percent), though it significantly bettered the 0.10 percent decline between April, 2014 and April, 2014. And since the current recovery officially began, in June, 2009, real private sector wages are up a grand total of 3.69 percent. That’s a more-than-eight-year stretch!

Consistent with recent trends, the picture is brighter in manufacturing – but not dramatically brighter. Whereas April real overall wages fell slightly, in manufacturing, they rose 0.28 percent over March levels, and are now up sequentially for the last ten months. Revisions left previous figures unchanged. So that’s impressive.

Year-on-year is where the story turns gloomier. April after-inflation manufacturing wages rose 1.88 percent over the preceding twelve months – another figure besting the comparable overall private sector real wage improvement. Also contrasting with the overall private sector, year-on-year real manufacturing wages have improved each month so far this year, from January’s 1.13 percent.

But as with private sector wages, the April annual increase represented a slowdown compared with the April, 2014-April, 2015 gain (1.92 percent), though it was a major improvement over the previous two Aprils, when real manufacturing wages went exactly nowhere.

Over the even longer term, manufacturing remains a big real-wage laggard. Since the recovery began in June, 2009, inflation-adjusted hourly pay has increased only 1.12 percent – less than a third as fast as real wages for the overall private sector.

And casting a big shadow on the manufacturing wage situation: a new report from the University of California, Berkeley Labor Center claiming that the families of just over a third of what its researchers call “front-line manufacturing workers” are enrolled in a welfare program of one form or another. A principal reason: More and more of these manufacturing workers are temps, hired through employment agencies.

In fact, the Berkeley Center contends, the share of families of these temporary manufacturing hires using welfare is 50 percent – the same as for workers in the traditionally low-wage fast food industry.

It’s important to note that the real wage figures I just analyzed covered both production and supervisory employees, so the two sets of findings aren’t directly comparable. But both make clear that the case for worrying that manufacturing is steadily losing its historic power to lift working class families into the middle class looks a lot stronger than the case that the sector is verging on a powerful upward real-wage surge.

(What’s Left of) Our Economy: US Manufacturing’s Out of Recession – Barely


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The Federal Reserve’s new industrial production data showed that domestic U.S. manufacturing grew sequentially in April for the first time in two months, and therefore climbed out of its second technical recession in less than two years. Revisions for January, February, and March were on the whole slightly negative.

The April recovery was led by surges in the durable goods super-sector, and durables sectors automotive and machinery that still were still too weak to end any of the technical recessions for those industries. In fact, domestic manufacturing’s output in real terms is still more than four percent lower than at the Great Recession’s onset in late 2007 – making clear that, over the longer haul, this manufacturing slump still hasn’t ended.

Here are the manufacturing highlights of the Federal Reserve’s new release on April industrial production:

>With real output rising sequentially in April for the first time in two months, American domestic manufacturing ended its second technical recession in less than a year.

>Inflation-adjusted production increased by 0.33 percent on month in April, but revisions were generally negative. March’s originally reported 0.24 percent month-to-month decrease is now pegged at a 0.30 percent drop. February’s 0.16 percent decline was revised upward to a 0.09 percent dip. But January’s previously reported 0.44 percent increases was downgraded to a 0.39 percent improvement.

>The April manufacturing snapback was led by durable goods and in particular by two industries within that super-sector – automotive and machinery.

>Durable goods’ real April monthly output growth of 0.60 percent was its best such performance since last July, and its first sequential improvement since February. But its price-adjusted production levels are still below those of July – a nine-month span of cumulative contraction that qualifies technically as a recession.

>March sequential durables output was downgraded from a 0.37 percent decline to a 0.58 percent drop. February’s monthly 0.15 percent growth was revised up to 0.19 percent.

>Constant dollar production in automotive jumped by 1.28 percent in April, the best sequential performance since December. But the increase followed a sharp (though upwardly revised) 1.40 percent sequential falloff in March. Partly as a result, real automotive output – which for years had led manufacturing’s comeback from its deep dive during the Great Recession – still remains one percent below its peak in last July, another nine-month cumulative decline that qualifies as a technical recession.

>Real machinery production popped by 2.37 percent – its best sequential increase since December, 2011. But inflation-adjusted output in the sector is still below levels it hit in June, 2011.

>Year-on-year, durables output after inflation rose 0.54 percent in April – less than half the rate between the previous Aprils (1.17 percent). And durable goods production overall in constant dollar terms is still 0.80 percent below the levels it hit when the Great Recession began in December, 2007 – more than eight years ago.

>Despite the April recovery and the end of its technical recession, real overall manufacturing output is also up only 0.54 percent year-on-year. That’s much slower growth than its 1.46 percent after-inflation production increase between April, 2014 and April, 2015.

>The April results leave real manufacturing output 4.13 percent below its pre-recession peak.

>In contrast with a recent trend, April sequential growth in the non-durable goods super-sector lagged that of durable goods, increasing only fractionally. Nonetheless, this meager improvement was the super-sector’s second in a row.

>Indeed, March’s initially reported 0.08 percent month-on-month dip in real non-durable goods production is now judged to have been a 0.05 percent increase. But February’s previously reported fractional gain has been downgraded to a substantial 0.36 percent decrease.

>On a year-on-year basis, non-durables real output advanced by 0.54 percent – matching the performance of overall manufacturing and durable goods. But that growth is less than one third that recorded from April, 2014 to April, 2015 (1.82 percent).

>Yet because of even more sluggish performance earlier during the economic recovery, real output of non-durable goods is still 10.02 percent lower than at its pre-recession peak, in July, 2007.

Making News: On Akron, Ohio Radio this Morning!


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I’m pleased to announce that I’ll be appearing again on The Ray Horner Show this morning on Akron, Ohio’s WAKR-AM radio.  I hope you’ll all be able to listen live starting at 9:10 AM EST for what promises to be a great discussion about how trade and manufacturing issues keep shaping this year’s tumultuous presidential campaign. Click here for the station’s website.



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