If you were only able to read one story explaining America's decline, Michael A. Fletcher's In Rust Belt, manufacturers add jobs, but factory pay isn’t what it used to be is the one to look at. Yet, Fletcher's narrative, which appears in the Washington Post, purports to show that America is experiencing a "budding revival" in manufacturing, a conclusion which is at odds with reality. And as we shall see, economist Paul Krugman touts the recent increase in manufacturing jobs as indicating the success of America's weak dollar policy. From the Post—
NORTH CANTON, OHIO — More than 1,000 applicants began lining up this week outside a former Hoover vacuum plant here in the hopes of joining a surprising trend in this part of the nation’s manufacturing heartland: new jobs.
Come June, the plant will be churning out EdenPure space heaters, vacuums, air purifiers and other small appliances once made in China. The turnabout for this factory and scores of others across the long-suffering Rust Belt offers vivid evidence of a budding revival in American manufacturing that has been a key driver of the economic recovery.
The nation’s factories have added 250,000 jobs since the beginning of last year — about 13 percent of what was lost during the recent recession — marking the first sustained increase in manufacturing employment since 1997.
But the new hiring also reflects another emerging reality of U.S. manufacturing: Many of the jobs don’t pay anything close to what they used to. Assembly-line workers who will be making the EdenPure products under the auspices of Suarez Corp. Industries will start at $7.50 an hour.
That’s a far cry from the $20 an hour that most workers made with Hoover, which shifted its century-old production lines to Mexico and El Paso in 2007 after concluding that it was too expensive to make its products in the industrial Midwest.
Behind the recovery
The Rust Belt’s nascent recovery is being fueled by a host of factors, including a revitalized auto sector, innovations that have made workers more productive, and a weakened dollar, which makes American products more appealing for export...
To be fair, Fletcher has pointed out the main weaknesses of the "nascent recovery"—this is the first "sustained increase" in manufacturing jobs since 1977, and the jobs pay only $7.50 an hour. But what about these constant references to "the recovery"? Following good journalistic practice, Fletcher serves up this drivel—
The Rust Belt’s fortunes have been one of the bright spots of a mostly shaky recovery. Nationally, manufacturing output grew at an estimated annual rate of 9.1 percent in the first three months of the year, while the overall economy expanded by just 1.8 percent, according to Federal Reserve figures.
“Everybody had written off the manufacturing sector and the Rust Belt, but now the manufacturing sector is the shining star of the U.S. recovery,” said Mark J. Perry, a professor at the University of Michigan at Flint and a visiting scholar at the American Enterprise Institute.
The recovery has been a long time coming. The nation lost nearly 6 million factory jobs, almost a third of its total, between 2000 and 2009. Those losses came on top of a long slide that started in 1979, when the nation’s manufacturing workforce peaked at 19.5 million. Currently, the nation has 11.7 million manufacturing workers, according to the Labor Department.
And it's not merely a recovery. According to some, it's a renaissance in lousy low-paying jobs.
A ‘renaissance’
A recent report by the Boston Consulting Group predicted that the United States is on the verge of a “manufacturing renaissance” as labor costs increase sharply in China and the Chinese currency slowly increases in value.
Those forces are combining to make the United States “one of the cheapest locations for manufacturing in the developed world,” the report said — a prediction that is not universally embraced as good news.
“It’s not clear that the manufacturing jobs that are now growing are all that desirable,” said Susan R. Helper, an economist at Case Western Reserve University.
From The Atlantic's The Decline of the Manufacturing Job and the Rise of ... Something Else. See my post Gotta Love That Worker Productivity.
It's a capitalist's wet dream. Look at America's extraordinary worker productivity! Those newly-employed Ohio workers will be cranking out EdenPure space heaters, vacuums and air purifiers at an astonishing rate, and all this for $7.50/hour. Naysayer Susan R. Helper has the temerity to say that these new jobs aren't all that desirable. How undesirable are these jobs? Well, gasoline goes for $3.75/gallon in Ohio right now, so for every hour you work, you can buy 2 gallons of gas (before deductions). Your 8-hour day should net you one fill-up at the Gas & Go, depending on the size of your gas tank. What a bargain!
Stuart Staniford, responding to Krugman, shows us the BLS manufacturing jobs data at his blog Early Warning.
BLS data for manufacturing employment, normalized with the civilian non-institutional population over age 20. Recession bars are shown in pale blue/grey. From Staniford: "You can see that this fraction has been declining since about 1970. It's worst in recessions. It used to recover somewhat between recessions, but since the 1980s it's tended to be flat or declining even during recoveries. Krugman is quite right that it was worse in the 2000s than in the 1990s. It's also true that its performance after the great recession is slightly better. However, it's only flat - it's not actually recovering."
So much for the "renaissance" in manufacturing jobs. Nevertheless, Paul Krugman is always delighted to demonstrate assert that stimulative government policies (emanating from the White House or the Fed) are making life better every day in every way. This is from his opinion piece Making Things In America—
Manufacturing, once America’s greatest strength, seemed to be in terminal decline.
But that may be changing. Manufacturing is one of the bright spots of a generally disappointing recovery, and there are signs — preliminary, but hopeful, nonetheless — that a sustained comeback may be under way.
And there’s something else you should know: If right-wing critics of efforts to rescue the economy had gotten their way, this comeback wouldn’t be happening.
[My note: Krugman's piece was published 2 days after Fletcher's Washington Post article. Was this purely coincidental? It's not clear, Krugman's article doesn't reference Fletcher's.]
Ah — there's the rub. Democrats are making the magic happen, and Paul loves Democrats. If we had listened to those Republican bastards, including Ron Paul, who wants to abolish the Fed, there wouldn't be any new manufacturing jobs paying a whopping $7.50 an hour. But Krugman also knows there is still a long way to go.
I don’t want to suggest that everything is wonderful about U.S. manufacturing. So far, the job gains are modest, and many new manufacturing jobs don’t offer good pay or benefits. The manufacturing revival isn’t going to make health reform unnecessary or obviate the need for a strong social safety net.
Still, better to have those jobs than none at all. Which brings me to those right-wing critics.
First, what’s driving the turnaround in our manufacturing trade? The main answer is that the U.S. dollar has fallen against other currencies, helping give U.S.-based manufacturing a cost advantage. A weaker dollar, it turns out, was just what U.S. industry needed.
Yet the Federal Reserve finds itself under intense pressure from the right to make the dollar stronger, not weaker...
So while we still have a deeply troubled economy, one piece of good news is that Americans are, once again, starting to actually make things. And we’re doing that thanks, in large part, to the fact that the Fed and the Obama administration ignored very bad advice from right-wingers — ideologues who still, in the face of all the evidence, claim to know something about creating prosperity.
[My note: Just the other week, Tim Geithner extolled America's strong dollar policy. See my post TIm Geithner Knows Diddly-Squat. Maybe Krugman and Geithner should meet up to get their story straight.]
Krugman lives in flatland, a 2-dimensional plane whose axes can be labeled Democrats (Good) and Republicans (Evil). And in his nimble mind, stimulus is best of all, so Bernanke is also Good. In flatland, we wouldn't have anything if Bernanke weren't debasing the dollar and Obama hadn't saved the General Motors, although Staniford's normalized data shows that we don't have anything anyway.
That leaves us with a weaker dollar, which has contributed to a large spike in energy & food costs and Americans paying more for imported goods. Thus newly hired workers in Ohio will make $7.50 an hour, but have to pay $3.75 for a gallon of gas. But for Krugman, it's better to have those minimum wage jobs than none at all. And why? Because the Democrats and the Fed ... uhmm ... did something, although it's not obvious what it is or whether we want it. It’s not clear that the manufacturing jobs that are now growing are all that desirable says Case Western economist Susan R. Helper.
Stuart Staniford made another graph, and let's end with that and a quote from Stuart.
If you were just to do the simplest thing and extrapolate the trend of the past 40 years, that suggests US manufacturing employment would reach zero some time in the 2030s.
"Of course, many things could intervene to prevent that: some kind of revolution in China, a collapse of the US dollar, a shift to protectionism in the US: these are just a few examples. But, absent a really big shift like that, I doubt this trend is going to turn around in the near future on account of moderate changes in the value of the dollar"
There you have it, a story of America's decline. The Manufacturing Rebound Is A Myth. Those vested in a failing, corrupt society will go to any lengths to pretend that everything is OK, or will be OK, even if they have to sell out American workers to do it.
Just ask Paul Krugman.
I stopped reading Krugman when the Times went to as online subscription system. His articles are not worth wasting one of my limit of free articles.
Posted by: John D | 05/23/2011 at 11:25 AM