(What’s Left of) Our Economy: Media Coverage of Trade and Jobs Issues Again Fails the Nation

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Alana Semuels, CNBC, currency manipulation, free trade agreements, GDP, Gerald F. Seib, gross domestic product, Korea, KORUS, Mainstream Media, manufacturing, manufacturing jobs, manufacturing trade deficit, Michael Froman, Obama, Phil LeBeau, The Atlantic, TPP, trade policy, Trans-Pacific Partnership, U.S. Trade Representative, wages, Wall Street Journal, {What's Left of) Our Economy

Silly me. Here we are in an election season practically defined by boiling working class economic anger at America’s political leaders. So I thought improved press coverage might be in store of the trade policy failings behind so much blue collar job loss and (at best) wage stagnation. Yet the last week alone has once again indicated that such hopes are in vain.

Example one was the October 20 Wall Street Journal post from Gerald F. Seib detailing the Obama administration’s efforts to sell Congress on the recently concluded Trans-Pacific Partnership (TPP) trade deal by touting its supposed benefits to individual states. Although that’s become a standard practice for such campaigns, Seib was right to report on the latest iteration.

But what Seib should have also reported on was all the evidence belying the sales pitch being made by U.S. Trade Representative Michael Froman. As usual, Froman’s case for the TPP relied exclusively on state-level exports. Apparently Seib forgot that trade flows also consist of imports, and thus their net effects can’t be determined without identifying trade balances and how they’ve changed.

Even worse, Seib was not only reminded of this potential half-truth, but actually given the data exposing the administration line as fraudulent. This came the following day, when I sent him an email pointing him to the government figures showing that in recent years, the great majority of states have seen their merchandise trade balances worsen, meaning that trade flows on balance have weakened their growth – and surely employment. The email also noted that the administration used its 2012 Korea trade agreement (KORUS) as the TPP’s model – and that since under this previous agreement, America’s bilateral trade shortfall has exploded, similarly dismal results seemed likeliest for TPP.

I’m still waiting for the courtesy of a reply.  More important, Seib has still failed to correct the record. So the odds have just improved that the Obama administration succeeds in hoodwinking the nation and its elected representatives.

Example two concerns the conventional wisdom that it’s completely naive to believe that American politicians can do anything to bring significant numbers of manufacturing jobs back to the United States, and that those that do return generally won’t pay like their predecessors. The Atlantic‘s Alana Semuels (in a post yesterday) and CNBC’s Phil LeBeau (in a tweet today), have been the latest to repeat this contention.

There’s no doubt that, largely because of the sector’s impressive (though apparently slowing) productivity gains, domestic manufacturing’s job-creation potential isn’t what it used to be, and that’s ultimately good for the economy, all else equal. But there’s also no doubt that for decades, a major manufacturing job (and wage) killer has been the mammoth trade deficit run by the sector – a gap that owes at least in part to the long string of offshoring-friendly trade deals signed and trade policy decisions (e.g., long-time acquiescence in China’s currency manipulation) made since the negotiation of the North American Free Trade Agreement.

Although it’s not explicitly reported in the U.S. government’s monthly trade reports, the dimensions of the shortfall have become truly jaw-dropping. Last year it hit $734 billion. This year, (as of August) it’s running nearly 16 percent ahead of that rate. Which means that a trillion dollar annual shortfall is within sight. According to the standard methodology for measuring the economy’s size and growth, the more than $850 billion trade deficit that could be registered this year translates directly into lost output. In fact, the 2014 manufacturing trade deficit represented 4.23 percent of gross domestic product in current dollar terms. Even simply narrowing the gap would boost production, and therefore employment and wages, dramatically.

Further, much of the current manufacturing trade deficit has nothing to do with the labor-intensive goods in which high income countries like the United States genuinely and naturally struggle to compete. Nearly $116 billion is in the automotive sector. Nearly $42.5 billion is in communications equipment. More than $33 billion is in pharmaceutical and medicines. More than $15 billion is in iron, steel, and similar metals. More than $5.9 billion is in machine tools and other metalworking machinery. More than $4.2 billion is in industrial heating and cooling equipment. Nearly $2.9 billion is in navigational, electro-medical, and other advanced instruments. Dig deeper into the numbers and you’ll see big deficits in construction equipment, relays and industrial controls, ball bearings, and the like. Can even most of these results be explained simply by market forces?

It’s understandable that many politicians would swallow easily debunked falsehoods or excessively defeatist memes about U.S. trade policy and its economic effects. That’s to be expected from a system that fosters corruption and rewards inertia and simple laziness. Why, however, has it become so common to see the same behavior from journalists?

(What’s Left of) Our Economy: Manufacturing Renaissance, RIP

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aerospace, Boston Consulting Group, defense manufacturing, durable goods, Federal Reserve, industrial production, inflation-adjusted growth, Jim Tankersley, manufacturing, manufacturing jobs, manufacturing renaissance, non-durable goods, Washington Post, {What's Left of) Our Economy

I’m pleased to announce that the Washington Post has just reported on a major recent finding of mine about America’s supposed manufacturing renaissance: In terms of the supremely important measure of inflation-adjusted output, it never happened.

As summarized in a new piece by correspondent Jim Tankersley, revisions last month to Federal Reserve data show that instead of surpassing the highs it reached on the eve of the last recession, more than seven years ago, manufacturing production in real terms still hasn’t recovered the ground it lost. By contrast, in the two previous economic recoveries, manufacturing took much less time to exceed its previous output peak

Shortly after discovering this change, I shared the information with Tankersley and, gratifyingly, he considered it newsworthy.

His write-up adds an angle I wasn’t aware of – much of the shortfall has taken place in defense and aerospace manufacturing. At the same time, the picture can be usefully fleshed out with these details:

>The timing of the revisions couldn’t have been stranger. They came out just a six days after the Federal Reserve released its report on June industrial production. How much easier these results would have been to report on had the Fed either included them in that release, or waited to issue them for incorporation into last week’s July figures!

>Although much of the manufacturing renaissance coverage and commentary has focused on the sector’s job levels (in fairness, the holders of jobs do things like vote), I’ve closely monitored production because it ultimately matters much more. After all, how can robust employment be generated and maintained over any period of time without robust output? This relationship is especially important to keep in mind given manufacturing’s historically strong productivity performance. Even though efficiency has been growing more slowly as of late, the sector has a proven knack for using technology and other innovations to turn out more stuff with fewer workers.

>The revisions were anything but trivial. The last pre-revision figures showed that the sector’s output was 2.68 percent greater after inflation than the level it reached at the last recession’s December, 2007 onset. According to the new data, from December, 2007 through June, 2015, real manufacturing production had actually shrunk — by 2.28 percent.

The subsequent July industrial production figures actually reported a December, 2007-June, 2015 manufacturing output decline that was even greater — 2.50 percent. That’s because the June, 2015 real output level was less than originally reported. Happily, the initial July reading showed a monthly increase big enough to bring domestic industry to within 1.67 percent of its pre-recession high.

>Consistent with Tankersley’s finding of outsized downward revisions in defense-related industries, the worst newly revealed manufacturing losses came in durable goods industries. Previously, their inflation-adjusted output was judged to be up 9.52 percent since its December, 2007 pre-recession peak. Now the improvement is pegged at only 2.27 percent.

>Since its own pre-recession peak (July, 2007), non-durable goods output has been even worse than originally thought, but by only 7.88 percent versus 5.20 percent.

>These revisions themselves will be revised further down the road (as will the latest June and July data).  It’s possible, in fact, that these changes will soon incorporate research strongly indicating that manufacturing output has been considerably over-counted in recent years. Why? Because there’s abundant evidence that government statisticians haven’t done well at assessing the rapidly falling prices – and therefore the prevalence in manufactured goods – of parts, components, and other inputs that are imported. If these price changes indeed haven’t been fully captured, then many final manufactures – especially in information technology hardware – contain higher levels of foreign content, and thus lower levels of U.S.-made content, than we currently think.

>What we know for sure now, though, is that by the most meaningful measure, there never was a U.S. manufacturing renaissance, and that those who have been singing its praises – ranging from President Obama to the Boston Consulting Group – have simply been manufacturing and selling snake oil.

Im-Politic: Race-Mongering Enters the Trade Debate

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African Americans, Center for Economic and Policy Research, Congressional Black Caucus, conservatives, Democrats, Employment, fast track, Gregory Meeks, Im-Politic, Labor Department, liberals, manufacturing jobs, Obama, politics, race relations, racism, Republicans, TPP, Trade, Trans-Pacific Partnership, urban poverty

It seems that New York City Democratic House Member Greg Meeks doesn’t think relations between blacks and whites in America lately have been strained enough by the series of dubious police shootings and the reactions they’ve ignited over the last year. And that there’s not enough bad blood in American politics overall lately. And that the heated debate in Congress and the nation over trade policy hasn’t been muddied with enough phony arguments. So he decided to inject a little race-mongering into the policy fight over President Obama’s proposed Trans-Pacific Partnership (TPP) trade agreement and a bill to grant the president fast track trade negotiating authority.

Meeks didn’t exactly come out and say that right-of-center opponents of the president’s trade agenda are racist. But his claims, made to members of the Congressional Black Caucus (CBC) and then to reporters, fail to qualify only if cynical Clintonian parsing is now the norm in American politics. According to Meeks, as reported by Politico, “[Mr. Obama] has endured things that no other president has,” and that “in his own discussions with colleagues he’s linked opposition to the president’s trade agenda to the hounding of Obama for his birth certificate and never-quite-ending questions about his religion. ‘Some folks don’t want to give him a vote because they don’t want to give him the authority every other president has had.’”

The New York Democrat therefore was too smart to smear anti-TPP and fast track Democrats and other liberals generally with the racism charge. After all, even most of the non-blacks among them have consistently supported the president’s other programs. But what about backing for the president’s trade agenda by Republicans and conservatives that neither Mr. Obama nor African-Americans (rightly or wrongly) have ever viewed as allies? And what of those on the Right who have essentially nudged and winked as more their radical fellows have cast the aspersions on the president’s background Meeks specifies? How does the Congressman’s racial paradigm explain their often pro-fast track and TPP positions?

Even worse, when it comes to substance, Meeks is ignoring (or doesn’t know about) the powerful evidence that the kinds of trade deals he’s long supported have devastated blacks’ economic prospects. How? By destroying jobs they’ve held in the relatively high-paying manufacturing sector. Not coincidentally, that’s the sector that has long dominated American trade flows. According to an analysis of government data by the Center for Economic and Policy Research, in 1979, African-Americans made up 23.9 percent of the nation’s manufacturing workers, who numbered about 19.4 million. That comes out to more than 4.6 million jobs that paid what are now called family wages.

As of 2013 – the Labor Department’s last comprehensive look at the situation – blacks comprised 8.8 percent of the nation’s 10.3 million manufacturing jobs. That’s only a little over 906,000 manufacturing positions. The employment massacre revealed here updates findings from eminent scholars such as Harvard’s William Julius Wilson that the disappearance of good jobs in African-American communities since the 1970s explains much of the poverty and related social problems they’ve suffered.

Not that there hasn’t been a silver-lining, though, to Meeks’ race-baiting. In using such mud-slinging to rally support for fast track and the TPP, he’s implicitly confessing to his CBC colleagues that they shouldn’t pay much attention to the economic case made for Mr. Obama’s trade agenda. In the process, of course, he’s telling the rest of us that we shouldn’t, either.

(What’s Left of) Our Economy: New Reasons to Brand Trade as a Major Manufacturing Jobs Killer

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automation, imports, Jobs, manufacturing, manufacturing jobs, offshoring, robots, technology, Trade, {What's Left of) Our Economy

Imagine if someone credibly reported something to the effect that education has no statistically significant affect on individuals’ incomes over any stretch of time. That would be considered pretty big news – especially if the nation was in the middle of a big debate over education policy.

So it’s so strange that so little has been made of a major new finding on why so many manufacturing jobs have disappeared in recent decades – especially since it’s come out with Americans in the middle of a big debate on trade policy.

Especially since the North American Free Trade Agreement 20 years ago made trade policy front page news – at least sometimes – the argument has raged: Do such trade deals deserve most of the blame for manufacturing job loss? Or is the main culprit is improving productivity, abetted mainly by dramatic advances in labor-saving technologies? The conventional wisdom, summarized neatly in this USAToday editorial, is that automation “wins” hands down.

But a Brookings Institution duo has just looked at some new data on the use of robots in industry, and found that “there is essentially no relationship between the change in manufacturing employment and robot use” around the world. Indeed, they maintain that countries that have installed more robots proportionately in their factories than the United States have lost a much smaller share of their manufacturing jobs.

Even more interesting – those countries that have led in robotics but fared relatively well on the manufacturing jobs front include Germany, Korea, France, and Italy. None of these economies is close to a paragon of free trade. Further, the countries that have lost the biggest shares of their manufacturing jobs, but that have lagged relatively speaking in robot-izing their industries, have remained wide open to manufactures imports and blase at best about offshoring – the United States, the United Kingdom, and Australia.

Now robot use isn’t the only way manufacturers use technology to boost productivity. And using technology isn’t the only way that manufacturers can boost productivity. Setting up factories differently can have dramatic impacts; so can job offshoring, as the U.S. Labor Department has come to agree.

But given that such offshoring often results from the incentives created by trade agreements and related trade policies (like ignoring foreign currency manipulation), and given this new evidence that more robots aren’t manufacturing job-killers, the process of elimination alone points strongly to one conclusion:  When it comes to U.S. manufacturing job loss (apologies to James Carville), “the trade policy, stupid” looks increasingly like a major contributor.

Incidentally, I wouldn’t have come upon the Brookings research had Tim Aeppel of The Wall Street Journal not written it up, so a tip of the hat to him!  

 

 

(What’s Left of) Our Economy: New Manufacturing Jobs Data Highlighted by November Milestone

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inflation-adjusted wages, Jobs, manufacturing, manufacturing jobs, non-farm payrolls, productivity, recovery, wages, {What's Left of) Our Economy

Manufacturing employment continued advancing strongly in January, but the real highlight of the new jobs report was the upwardly revised 45,000 November gain – the best monthly improvement since August, 1998. In addition, January’s preliminary year-on-year job creation of 228,000 was the strongest such increase since March, 2012. Nonetheless, the latest (December) data show real manufacturing wages flat-lined month-to-month, and the January monthly rise in pre-inflation wages didn’t even return the sector’s pay to its November levels. In addition, the weakening manufacturing labor productivity growth reported by the Bureau of Labor Statistics yesterday casts a shadow on manufacturing’s improving jobs performance.

Here’s my full analysis of the latest monthly (January) manufacturing figures contained in this morning’s employment report from the Bureau of Labor Statistics: 

>Today’s January jobs figures show that manufacturing employment gains have picked up considerably since last summer. Last month, the sector added 22,000 net new jobs, for its fourth straight month of job creation greater than 20,000.

>Although the January and upwardly revised December figures represented monthly employment gains slower than November’s, the November figure was a genuine milestone. Revised way up from 29,000 to 45,000, its increase was the greatest since August, 1998’s 141,000 jump. Further, in one sense, the November increase was even more impressive, since the 1998 surge followed a July nosedive in manufacturing employment of 186,000.

>Thanks partly to its recent employment improvement and to last winter’s harsh weather, January’s year-on-year manufacturing job creation gain of 228,000 was the best such reading since the 229,000 recorded in March, 2012. Also due in part to last year’s winter, manufacturing’s January 2013-14 job gains were only 122,000. Yet even after the warm up, the year-on-year increases didn’t reach the 200,000 level until September.

>This morning’s BLS data revised October’s monthly manufacturing jobs gains down from 24,000 to 23,000, but on top of the November increase, December’s 17,000 improvement was revised up to 26,000 as well.

>Manufacturing’s preliminary January employment level of 12.330 million was its highest since February, 2009 – when it totaled 12.380 million.

>The good manufacturing jobs figures, however, continue contrasting with a wage performance that still badly lags that of the rest of the economy.

> The new BLS data reveal that, adjusting for inflation, manufacturing wages flat-lined on a monthly basis in December, versus a 0.19 percent rise for all private sector workers. (Both figures are preliminary.)

>Year on year, real manufacturing wages rose by 0.48 percent in December. That increase bettered the 0.29 percent November gain, but both figures were lower than those for the private sector overall.

>On a monthly basis, pre-inflation manufacturing wages increased 0.28 percent in January. That’s an improvement over December’s 0.36 percent monthly drop, but at $24.94 per hour, still leaves these wages below November’s $24.96 level. (The December and January figures are preliminary.)

>Yet, both these monthly pre-inflation manufacturing wage changes trailed those of the private sector, where they rose 0.49 percent in January following a drop of 0.20 percent in December.

>Real manufacturing wages as of December are down 1.77 percent since the current recovery technically began in June, 2009.  Since then, overall real private sector wages are up 1.07 percent.

>Nominal private sector wages are up 11.69 percent since the recovery began – to $24.75 per hour according to the preliminary January data. Manufacturing wages, though still higher at $24.94 per hour, are up only 8.34 percent.

>Despite the recent improvement, because total non-farm employment keeps growing strongly, too, manufacturing remains a job-creation laggard during the current economic recovery.

>From the start of the recession in December, 2007 through its employment bottom in February, 2010, total non-farm jobs shrank by 8.695 million. Since then, such employment has grown by 11.200 million.

>By contrast, manufacturing lost 2.293 million jobs from December, 2007 through February, 2010. Since then, it has regained only 877,000 net new jobs (38.25 percent). Manufacturing, therefore, has generated only 7.83 percent of the total jobs regained by the economy since that trough.

>As a result, although manufacturing still represented 10.69 percent of all non-farm jobs in February, 2010, its share today is down to 8.75 percent.

 

(What’s Left of) Our Economy: “Manufacturing Day” Coincides with a Lousy Jobs Report

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Employment, Jobs, manufacturing, Manufacturing Day, manufacturing jobs, manufacturing renaissance, manufacturing wages, wages, {What's Left of) Our Economy

It’s like a sick joke. As the National Association of Manufacturers and other industry groups celebrated “Manufacturing Day” today, the new monthly jobs report told us that the sector’s employment creation has sunk into stagnation territory. Indeed, its share of total U.S. jobs has hit a record low, and its wages remain much weaker than those of the private sector overall. Moreover, a jobs recession in the large non-durable goods sector proceeded even deeper into its fourth year.

Here’s my analysis of the September manufacturing figures contained in this morning’s employment report from the Bureau of Labor Statistics:

Manufacturing employment inched up by 4,000 in September, but August’s zero job-creation figure was revised to a 4,000 loss (the first monthly decline since last July), and July’s 28,000 gain was revised down to 24,000.

This stagnation forced manufacturing’s share of total nonfarm employment (the Labor Department’s U.S. employment universe) down to just under 8.72 percent in September – far below even the figure registered by the sector during its February, 2010 absolute employment bottom (10.69 percent).

As a result, manufacturing cemented its status as a major job-creation laggard during the current recovery. Since that 2010 employment bottom, the sector has created only 701,000 of the 9.78 million non-farm jobs created during this period – 7.15 percent. And whereas total non-farm employment now exceeds its pre-recession level by 1.08 million, manufacturing has regained only 30.57 percent of the 2.293 million jobs it lost during the downturn.

Manufacturing wages adjusted for inflation rose by five cents an hour (0.48 percent) in August (the latest available figure) after dropping by a penny (0.10 percent) in July. Real wages in the sector also increased by three cents an hour (0.29 percent) over last August’s level after flat-lining year-on-year in July. But these modest increases still mean that real manufacturing wages are down 2.15 percent since the recovery began in June, 2009 – compared with a 0.29 percent increase in overall private sector wages after inflation.

In addition, the 3,000 September job drop for the nondurable goods sector means that these industries continued to be net employment losers even since manufacturing’s overall payrolls hit their recessionary low in February, 2010.

Net new manufacturing job creation is still up in 2014 on a year-on-year basis – from 79,000 in January to 161,000 in September. But it’s now lower than the 172,000 peak hit in July. At the same time, manufacturing’s average monthly year-on-year jobs increase this year (119,333) is well above the comparable 2013 figure (76,333).

In other words, Manufacturing Day my foot!

(What’s Left of) Our Economy: June Data Show Good Manufacturing Jobs Gains and Ongoing Problems

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(What's Left of) Our Economy; manufacturing, manufacturing jobs, manufacturing renaissance, manufacturing wages

I’ve always considered the U.S. manufacturing output figures to be much more important than the manufacturing jobs figures, since it’s impossible to boost industrial employment without more industrial output. Moreover, productivity gains in manufacturing have been genuine — and robust — for decades. Therefore, payrolls aren’t the best measure of manufacturing’s health, and consequently don’t shed incredibly bright light on the issue of whether the sector is enjoying or verging on a renaissance.

But manufacturing workers, and former manufacturing workers, are human beings, and their story naturally appeals to journalists and many well-intentioned folks generally (at least sometimes). Moreover, these workers and ex-workers vote, so they’re often of great interest to politicians. So there’s no doubt that the manufacturing employment scene is worth following.

This morning, the June manufacturing jobs numbers were released by the Labor Department, along with the rest of the data on the national employment scene. They definitely contained some good news, in the form of solid monthly and year-on-year manufacturing job gains. At the same time, these data also revealed that American industry still badly lags the overall economy in job creation, and that its durable goods sector is mired in a multi-year slump. Further, the latest (May) data show that manufacturing wages keep falling faster than overall wages. Here are the details:

June’s 16,000 manufacturing jobs gain was the best monthly performance since February’s 20,000. In addition, the May employment improvement was revised up from 10,000 to 11,000, and the April rise from 4,000 to 8,000.

Nonetheless, manufacturing’s share of total nonfarm employment actually dipped from an upwardly revised 8.74 percent in May to a new record low of 8.73 percent.

Manufacturing’s job gains since its recessionary employment bottom in February, 2010 have totaled 668,000 – 29.13 percent of the jobs it lost from the recession’s December, 2007 onset through that date.

By contrast, total growth in nonfarm jobs (the Bureau of Labor Statistics’ U.S. employment data universe) during that period has been 9.125 million – nearly 13.70 times greater. And the overall employment in the overall economy is now 0.35 percent higher than when the recession began.

Moreover, the large nondurable goods sector lost 1,000 jobs on net in June. At 4.640 million workers, its employment levels stand below even those to which it fell in the February, 2010 overall manufacturing jobs bottom (4.470 million).

Manufacturing’s year-on-year jobs growth continued accelerating in June – to 130,000 from the 79,000 improvement in January. Yet through June, manufacturing’s average year-on-year monthly job gain has still only been 96,670 – lower than the 109,400 level for 2013 and less than half of 2012’s 215,600 level.

Finally, the rise in manufacturing hiring continues to be clouded by the sector’s poor wage performance. Since the current recovery technically began in June, 2009 through May (the latest available data), total private sector hourly pay has edged down by 0.19 percent when adjusted for inflation. Real manufacturing wages have decreased by 2.71 percent during this period, and fell month-on-month and year-on-year in May.

Manufacturing’s lagging recent hiring progress and ongoing wage decline add yet again to the abundant evidence documenting that industry’s jobs rebound earlier during the economic recovery was purely cyclical, not structural, and that contrary to President Obama and others, it’s anything but a sign that a structural domestic manufacturing renaissance is in sight.

Moreover, if history is a guide, the kinds of new trade agreements President Obama could complete with fast track negotiating authority from Congress will put further downward pressure on manufacturing job creation.

Here’s a link to the new jobs report, so you can examine the raw figures yourself!