An article yesterday titled ‘Manufacturing: Make or break?’ summarizes a lot of what I have been talking about with respect to the current and prospective importance of loss in manufacturing jobs in the developed countries.  As the article summary puts it “The shift of manufacturing to low-wage parts of the world was supposed to usher in an era of well-paid service sector jobs. But as the factories have gone dark, much of the work connected to R&D has also taken flight while the number of low-paid service jobs has mushroomed. Now post-industrial economies are reconsidering the importance of their manufacturing sectors”, and that “Many policy makers believe future growth once again lies in making things” – referencing the rush by governments to stress the importance of a vital manufacturing sector to future economic growth.  How can it be otherwise.  As I have said many times, manufacturing creates ‘things’ of at least some lasting value, service jobs in general do not do that – nor are the ‘products’ generated from service jobs typically as subsequently transferable as are products generated by manufacturing jobs.

The article reports President Obama’s new “Middle Class Task Force” sees the reinvigoration of the “flagging” U.S. manufacturing sector as critical if average Americans – whose after-inflation incomes have stagnated for years – are to achieve real wage gains in coming years.  Apparently Mr. Obama imagines the U.S. factories of tomorrow producing high-tech electric cars, silicon chips and solar panels.

In my view, the only way that the developed countries will retain a meaningful manufacturing base going forward is by generating manufactured products in capital-intensive, low labour requirement, manufacturing plants.  The labour rates in the developed countries simply are not, and will not be, competitive without a major reduction in the expectations and standards of living of residents of the developed countries.  Anyone who thinks that production workers – be they Chinese, Tiawanese, etc. – are not capable of producing high quality products needs to give their head a shake.  They can and they are doing that.  So think about it, is the worker who makes or made $60 – $70 per hour at a car assembly plant in Michigan going to be willing to work for (say) $10 – $15 per hour in order to compete with developing country labour rates plus the attendant incremental transportation costs related to making a car in China and selling it in Michigan?  It doesn’t take rocket science to answer that one!  Either the worker in Michigan will unhappily ride a bicycle to work and eat pork and beans instead of steak, or be unemployed and be even less happy with his/her lot in life.

I believe the developed countries by giving up their manufacturing jobs – particularly in the past 10 years – to maintain and even increase the standard of living for their residents have played the old ‘short-term gain for long-term pain’ game.  This seems obvious to me, and I can’t see how others don’t think and write extensively about this.  In prior posts I have invited readers who disagree with me on this and other topics – and to comment on my blog posts and tell me why I am wrong.  As a Canadian living in Southern Ontario I assure you I very much want to be wrong on this ‘loss of manufacturing jobs’ issue.  To date, no reader has taken me up on ‘straightening my thinking out’.  When I receive no comments when I invite them there are three obvious conclusions:  (1) no one reads my blog posts – and I know that is not true from by Blog visit statistics; (2) no one disagrees with me, which I seriously doubt; or (3) some readers do disagree with me but simply can’t be bothered to respond or are reluctant to say what they think in a Blog comment.  I encourage the latter group to come out of the woodwork.

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I think two unrelated articles, one by Paul Krugman (the Nobel Prize Winning American Economist) and one by Catherine Rampell (who I can’t otherwise identify) are worth talking about.

First, Krugman in a post on his Blog titled ‘A strange madness‘ comments on what he calls “a bit on the craziness sweeping America”.  Among other things he notes that his ‘hate mail’ has reached levels he hasn’t seen since 2004 and that he now gets “spitting, incoherent rage over articles on, um, health care economics or macro modeling” where he finds it “impossible to tell” what enrages people so much about those articles.  In the end, Krugman says:  “Something is going very wrong in the heads of a substantial number of Americans”.  Not having seen the specifics of either Dr. Krugman’s articles or the replies he alludes to, it doesn’t strike me as other than common sense that if enough people:

•    lose their jobs;

•    lose confidence in the notion of the ‘American Dream’ being theirs for the taking; and,

•    find their standard of living deteriorating or think it might

that one well might find themselves surrounded by vocally unhappy people.  My hope would be that the protests remain vocal and the baseball bats (or worse) are kept in the closets of America.  I can’t imagine Dr. Krugman at some level doesn’t see things this way as well.

Second, Rampell, in an article titled ‘Oh What a Time to Be Young!’ quotes statistics suggesting the U.S. unemployment rate among ‘unemployed teens’ currently is 25.5%, the highest level since the Bureau of Labor Statistics began keeping track of such data in 1948.  I have said in previous posts on this Blog that youth unemployment is in my view a large potential problem.  Happy people from my observation broadly have a few things in common.  First, they are busy doing whatever interests them, and don’t have excessive amounts of ‘time on their hands’.  Second, they feel they are productive members of society as they measure that – and as a result are reasonably ‘ego-satisfied’.  Third, as the old saying goes ‘Idle Hands Are The Devil’s Tools’ and ‘idle hands’ can lead to anti-social behavior – I suspect particularly among youth.  In my view that young people are having increased difficulty finding jobs in the current economic environment does not bode well.  As I have commented on previously I think this should be an issue that ranks high on the agenda of the current U.S. Administration, and on the agendas of all governments.

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A brief article today titled ‘Next bonanza eludes copper miners and strains supply’ reports research by the Copper Study Group, Brook Hunt, says the annual supply of copper may peak at around 20 million tonnes in 4 years and decline as demand rises, and that there is mounting evidence to suggest copper supply may be at greater risk unless copper prices extend their rally to record highs and beyond – thereby (I presume, as the article doesn’t say this) resulting in more copper exploration and mine development than currently is being undertaken.  The article does say that in 2008 year there was zero growth in world concentrates output, the lifeblood of the smelting and refining industry, and that London based GFMS sees a contraction of 1.6% or more this year – the first annual decline since 2002.

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An article titled ‘U.S. economy sheds 216,000 jobs in August’ says just that, and goes on to say the U.S. unemployment rate rose to 9.7% after dipping to 9.4% in July. If this number holds (jobs losses for June/July concurrently were adjusted upward by 49,000) the decline in U.S. job losses from the previous month was the smallest in absolute numbers experienced in 2009.  The U.S. Labor Department also said that since December 1, 2007 the 6.9 million jobs have been lost in the U.S.

This year, the following monthly numbers U.S. Job Losses have been reported, and then in several cases subsequently have been adjusted (usually upward):  January – 614,000, February – 697,000, March – 742,000, April – 539,999, May – 345,000, June – 467,000, July – 276,000, August – 216,000.  By any standard monthly U.S. job losses have been declining in since March, and at the current rate of monthly decline can be interpreted to say that U.S. Job Losses could bottom out by the end of 2009  or early 2010 – even setting aside what I would expect to be temporary job hires in October – December related to the Thanksgiving and Christmas retail season.  That said, in my view continuing U.S. jobs losses are a ‘There is no joy in Mudville’ story for the time being at least.

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