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Tuesday, December 16, 2014

More Manufacturing

Literally!

As shown in the graph below, manufacturing (real) output (the red line) has finally recovered from the Obama recession and clearly has a lot of momentum in the growth direction.  Of course, also clearly, that "momentum" isn't really momentum at all, and can change nearly instantaneously.



From the Money Illusion comes this somewhat related commentary:
First some international comparisons.  In the US, IP [Industrial Production] is up more that 73% in the past 25 years. In Japan it fell by 1.5%.  Some of that is population, but not all. After all, Japan’s population is higher than it was 25 years ago, and America’s has risen by roughly 30%, not 73%.  America industrializes as Japan de-industrializes. Germany reunified 25 years ago, which might affect the data, but their IP is up only about 30% since 1991.  France is up only 9% in 25 years. (The 35-hour workweek?).   Britain is similar to Japan, down by about 1%.  (Falling North Sea oil output?) Italy is down 11.2% in 25 years.  (Berlusconi spending too much time at orgies?) It’s the US that stands out as an industrial power, at least if the data is correct.
I wrote "somewhat related" because the numbers don't exactly match between countries (various countries slice and dice Industrial Production versus Manufacturing differently and the above commentary is more related to Industrial Production than Manufacturing, but the longer term trends are pretty similar).  So you can get an idea from this, but I suggest not quoting any of the numbers without doing more extensive research to understand what you are quoting.  Or at least put forth a caveat like I just did.

Nonetheless, of all the advanced economies of any size, the United States is actually doing quite well as far as Manufacturing output and Industrial Production goes (Industrial Production looks even better recently than the above chart because of the shale oil boomlet).  Germany is the closest and may possibly be better, but even if so, not by much.

On the other hand, as the above graph also shows, while real Manufacturing output is up 73% over the time period (20 years), the number of jobs has dropped by 30% and as a percent of the workforce has fared even more poorly. A common explanation for the loss of jobs is that they've been transferred overseas, but given the fairly dramatic increase in output, all of the job loss and then some can be explained by increased productivity.

In other words, technology is more the enemy of jobs than foreign competition.  But technology is what makes us all better off over the long haul.

28 comments:

erp said...

Bret, I'm not sure what is being "manufactured"? Certainly not toasters and the like or cars or ...

Bret said...

erp,

You don't think we manufacture cars? Even other than GM, Ford, and Chrysler, ever heard of Tesla? And the related battery factories Musk is building?

The list of what we do manufacture is tremendously long and I can't possibly list everything. How about lettuce thinning robots, for example?

Clovis e Adri said...

Bret,

A somewhat more optimistic post, I guess your troubles at your robot factory have been weighting less lately.

I would just counter that technology has been what made us better off in the long haul so far, but not necessarily we all will keep sharing from its improvements.

erp said...

Bret, I know some cars are made here, but thought most cars were made in Asia. Chrysler is owned by FIAT and the local car dealer has a huge sign saying just that and isn't there some kind of kerfuffle about Musk's batteries?

Of course, it's well known that best robots are made in Southern California!!!!

Bret said...

Like almost everything, parts of cars are made lots of places all over the world.

Review I, Pencil to refresh your memory on how international even a thing as simple as a pencil was even all those decades ago when it was written.

Bret said...

Clovis wrote: "I would just counter that technology has been what made us better off in the long haul so far, but not necessarily we all will keep sharing from its improvements."

That's quite a statement to toss out. Been in touch with your inner neo-Luddite? :-)

erp said...

Bret, I do remember I, Pencil and also remember my cousin, another physicist, who went to work at Boeing fifty years ago and left in disgust to start his own company because he said they couldn't sharpen a pencil for less than 50 grand -- probably costs 150 grand now, not that anybody uses a pencil anymore.

erp said...

Clovis, I very much disagree with that statement because we have no idea what's out there running around in somebody's head.

When "Get Smart" (a silly TV comedy show) was popular we all thought it was ridiculous that a shoe could double as a phone. Even in the age of the first Star Trek series, nobody seriously thought that kindergarten kids would have smart phones with links to the known world.

I'm still sore that replicators and transporters aren't commercially available yet, but fully believe they or something even more fantastic will be during the lifetimes of my grandchildren.

If only people will be left alone to think and create.

Peter said...

the number of jobs has dropped by 30% and as a percent of the workforce has fared even more poorly.

Bret, are you sure poorly is the adverb you want? Isn't increased production with lower labour costs the very definition of efficiency? Much as I hate the phrase "creative destruction", it seems it applies across sectors as well as within them. Even "fared" and "enemy of jobs" are problematic to the extent they suggests maintaining a set percentage of the workforce is an objective of the manufacturing sector, which it isn't. With a little light editing, your post could fit nicely on a left wing site.

Production up, unemployment down, the dollar firmer, house prices rising, inflation low and steady, self-sufficiency in oil achieved---all under Obama's watch. How much more good news can the GOP handle leading into 2016?

but not necessarily we all will keep sharing from its improvements.

Clovis, that's a common theme among progressives, who are increasingly allergic to good news and nostalgic for craft guilds and medieval stasis. But if that concern is a serious one and not just yet another leftist dystopic trope, shouldn't you be able to answer the following question: With the arguable exception of aboriginal peoples, what classes, sectors, groups, etc. in society can be said to have not shared in the benefits from the myriad technological achievements of the past two hundred years? I'm enough of an old-fashioned conservative to argue that we are all generally worse off because certain inventions (biological weapons, Facebook, etc.), but that they benefit some classes and not others strikes me as just anti-historical cant.

Clovis e Adri said...

Peter,

---
But if that concern is a serious one and not just yet another leftist dystopic trope, shouldn't you be able to answer the following question:
---
I answered your question from the begin. My phrase above started with the recognition that past technological advances have been shared. My remark was about the future.

And mine is a serious concern indeed, many times I wondered here what will be of people in a future without jobs for humans. The naive one here is the person who thinks the future is already settled by what happened in the past.

---
Been in touch with your inner neo-Luddite? :-)
---
Me? Not yet, but the same Elon Musk you cite above looks to be in just that mood lately...

Bret said...

Clovis wrote: "I wondered here what will be of people in a future without jobs for humans."

We'll all sit around and contemplate the origins of the cosmos, of course! :-)

Or maybe we'll immerse ourselves in ever more realistic virtual reality, living continuous fantastical dreams.

The possibilities are endless, and fun.

Clovis wrote: "The naive one here is the person who thinks the future is already settled by what happened in the past."

I see. The Luddites have been wrong for hundreds of years and technology has been hugely beneficial for thousands of years, but past trends don't necessarily give any information about future trends. It is absolutely true that we may never make any additional advances in health and medicine, entertainment, energy, food, transportation, etc. and/or that these future technologies somehow make the human existence for the vast majority of people empty and unfulfilling, or possibly that Hals & Terminators & Vadars & doomsday weapons (oh my!) not only come into existence, but are also used to exterminate (virtually) all humans on earth.

Maybe, but me thinks that you (and Elon) are watching too many sci-fi horror movies. :-)

But I personally choose to live in my "naive" world of helping create technology to better the lives of humanity.

Bret said...

Peter wrote: "With a little light editing, your post could fit nicely on a left wing site."

Once in a great while, I try to write with a "balanced" tone, just to see what's it like. :-)

I guess the actual point is that much of the world has been complaining about the lack of manufacturing jobs with the implication that manufacturing output has been cratering. I'm willing to concede "poor" as a description of job growth as long as we all realize that output growth has been pretty decent.

Then we can separate the two and argue about the importance of jobs as a separate topic.

erp said...

Bret & Peter:

Jobs are important, but they need to be real jobs, not make work projects. I wonder which category the new jobs fall into? Jobs which fall into increases in the federal or any other government bureaucracy are detriments not positives for the economy and our lives in general.

Peter said...

It's funny. Back in the fifties, our collective optimism led us to dream how technology would lead us to a paradise where "we wouldn't have to work". Today, our pessimistic zeitgeist makes us tremble at the thought of a "future without jobs".

Harry Eagar said...

Obama recession? Where were you in 2008?

Bret said...

I was watching Obama get elected and watching entrepreneurs and investors everywhere pull back because they felt he would damage the economy at every turn - which he ded.

Where were you?

Annoying Old Guy said...

Bret;

You mean like this?

Bret said...

aog,

Well, that link discusses the trends over longer time frames.

My anecdotal experience was a substantial pullback in investment and entrepreneurship when it become obvious that Obama was going to be elected with a large democrat majority congress. People I know were stuffing their money in proverbial mattresses.

That's one of the reasons why, in my opinion, interest rates and inflation cratered and stayed low, the Fed couldn't give money away, unemployment stayed stubbornly high, and the recession dragged on much longer than previous recessions.

Annoying Old Guy said...

Bret;

My reading was the article claims there was a long term trend that accelerated significantly in 2008, which is consistent with your anecdotal evidence.

Clovis e Adri said...

To the extent I understand 2008 and its aftermath, ├Čt is better characterized as a crisis in demand, not a supply crisis.

Which means that both Bret's anecdotes and AOG links may be true but of little importance. To wit, the numbers cited in that link do look like a drop in the ocean.

Harry Eagar said...

Actually, I knew entepreneurs at that time who were anxious to invest but they could not get a look from insolvent banks.

Whatever your interpretation of events, it was not Obama that made the banks insolvent.

erp said...

No, Obama is just the most current in a long line of lefties interested in destroying our economy. It was Carter and the CRA that started this latest round of breaking the bank.

Bret, do you think the recession is over? I read, sorry no link I'm using my iPad for various reasons and it's too much trouble to figure out how to find links, that almost all the jobs created during the past six years went to illegals, i.e., low paying.

Peter said...

Actually, I knew entepreneurs at that time who were anxious to invest but they could not get a look from insolvent banks.

Fortunately, solvent banks came to their rescue.

Really, Harry, what are you saying?

Harry Eagar said...

No they didn't. It's doubtful that, after subtracting TARP deposits, any important banks were solvent.

Back then, I used to go to the annual economic conference of the biggest local bank (a subsidiary of an insolvent European bank -- sorry, erp, blaming CRA makes no sense at all), and each year the vice chairman would say, we are ready to lend, we have $3 billion to lend' but the amount never changed because the bank wasn't making any loans (as I knew from local businessmen who told me they couldn't even get the bank to accept an application.)

Anybody who didn't have an overhang from a pre-2008 line of credit was in a world of hurt.

erp said...

Harry, trust me, in the real world, it makes a lot of sense because it's the fact.

Howard said...

I think there was a period during the downturn and early stages of the recovery where weak demand was a significant problem. It may still be a meaningful part of the problem in Europe. There was and still is a significant supply-side problem. Here are some items to consider:

Scott Sumner here

Casey Mulligan here and here

Tom Blumer here here here

There's a lot of material there which you won't find many places.

Hey Skipper said...

You don't think we manufacture cars? Even other than GM, Ford, and Chrysler, ever heard of Tesla? And the related battery factories Musk is building?

IIRC, BMW's largest, and most efficient, plant is in South Carolina.

It is in the middle of a $1.25B expansion.

[Harry:] a subsidiary of an insolvent European bank -- sorry, erp, blaming CRA makes no sense at all

No, it probably makes more sense to blame socialism for Europe's problems, and the CRA being a cause of the US's.

Because, after all, Europe is entitled to its own schlamozzles.

erp said...

Skipper:

Re: Auto manufacturing

I wasn't clear. I meant we are not manufacturing American cars. I knew Germany and Japan are making cars here.

Re: Different nomenclature for Socialism

Different strokes for different folks leading to the same bad outcome.