Manufacturing Under President Donald Trump

logan-real-pic

President-elect Trump was elected on the thesis that he would bring back manufacturing jobs to the U.S. and stop them from leaving.  Before we can gauge the future success or failure of this proposed initiative, we need to understand the current landscape for manufacturing jobs in the country.

The first myth that needs to be busted is that the US doesn’t make anything anymore. Our manufacturing output is near the highest it’s ever been.  While it is true that China displaced the US as the largest manufacturing nation in 2010, the US has outperformed most other wealthy countries in the growth of “value-added” which is a measure of the economic contribution of manufactures in the design, assembly, and marketing of the product.

From Fred:
https://fred.stlouisfed.org/series/OUTMS

logan-manu

While our manufacturing output has been stellar, we have seen a downshift in employment that started decades ago.   This was due to displacement technologies that the movement of manufacturing to areas with cheaper labor to create better profit margins.

From Fred:
https://fred.stlouisfed.org/series/MANEMP

logan-manu-2-jobs

When China entered the World Trade Organization,  the trade balance got more prominent, and manufacturing employment fell in the U.S.  Advances in technology, and cheaper labor allow for lower prices and better profit margins. This is a price we do pay for living in a capitalist, shareholder nation.

From Calculated Risk:
http://www.calculatedriskblog.com/2016/12/trade-deficit-at-426-billion-in-october.html
tradeoct2016-1

The Census Bureau shows us that even though manufacturing is the 4th most significant employment sector in the U.S., it is now less than 9% of the total workforce.

http://www.census.gov/library/visualizations/2016/comm/manufacturing_day2016.html
1475860287524

Employment in manufacturing has been falling while the output is growing.  A lot of the productivity gains have come in the manufacturing sector, and while this is great for production, it impacts total employment.

From Fred:

Manufacturing: Up? Down?


logan-manu-3

From Brooking:

manufacting-brooking

Will we really go into a trade war with China? I don’t believe Trump will start a trade war because while near 48% of the US population are workers, 100% of them are consumers and the US is a consumption-based economy.  Consumers will be negatively affected by a trade war, and that will impact the economy, even if it results in some gains in manufacturing. So far, President-elect Trump has not talked about taxing companies who are headquartered in the U.S. but do manufacturing in other countries. He has spoken about making the U.S. more business-friendly, and taxing current manufacturing plants seems to be in direct conflict with this.

So, let’s be realistic.  Regardless of who is president, we cannot expect to gain 5-9 million manufacturing jobs in the next 4-8 years. A more realistic scenario is that while output may continue to grow with future advances in technology, jobs in this sector will likely continue to shrink, stay flat or at best grow slowly against population growth.

The strong dollar puts limits on manufacturing growth expectations.  With a much stronger dollar, oil and commodities will get hit. So much of the world imports follow oil prices.

Another “must-follow” on twitter:

 

Higher oil prices = positive (!) for US manufacturing activity. Goods news ahead if oil prices continue rising

oil-exports

oil-world-trade

An infrastructure bill could do more for employment in the short term then dithering around the edges of the manufacturing sector by passing out favors to some companies that promise to keep jobs in America while threatening punishment on others.   Steve Bannon’s trillion-dollar infrastructure plan actually makes sense if we can find workers that are capable of doing this type of work.   Last I heard we were planning on deporting some of those people. There is a big difference for economic output between hiring existing-working crews to work than hiring new people who don’t have jobs. The job openings for construction jobs is growing every year with hours worked being at all-time highs for a reason. This is a reason why I like Bannon’s go great thesis to make sure we target areas of high unemployment of men of all ages. It might be wishful thinking with unemployment claims low and job openings above 5.5 million, but one can hope.

full-time-workers

 

I hope this article gives you some perspective on the state of manufacturing in America. We have a new President, and we should pray for his success, as his success means America is doing great.

On another note, my readers and followers on social media know my love-hate relationship with the Anti-American bears. These are people who call for the collapse of America every year with worthless economic rants.  I hate smoking, but every 15 years I am going to pull out a cigar and take a photo of me smoking it,   to make a point that America hasn’t collapsed yet,  like the extreme left and right talk about every day. The stock markets are at all-time highs, and we still have 74 straight months of job gains. Recessions come and go, but 24/7 bears always stay 24/7 bears ( Hence the 24-hour fitness shirt for you)

Merry Christmas Bears !!!!

2016                                                             2001
15337481_10154320722053250_5888357932436601930_n

Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page https://www.facebook.com/Logan.Mohtashami

3 thoughts

  1. I fear that your views are very narrow and almost tunnel visioned. You suggest we can’t bring a certain number of jobs back over the next 4-8 years, but we can begin turning around a negative trend. Next you suggest we are larger than almost all other countries except China. I am someone who has always competed and being in second place is not what I have strived for during competition. Perhaps you should pick up a bat or racket, or even just a ball, and experience what it feels like being in the game instead of sitting in the stands. Lastly, you have only focused on what you know and not what you don’t. Please don’t short-circuit an effort just because you can put it into a spreadsheet and graph it.

    1. Mr. Walker, I believe you missed the purpose of the article. The article was to show the multi decade rise of manufacturing output and the decline in total employment in manufacturing. If a country had a lower rate of growth in output then it would need more workers to create more of it. In our case, in America, a lot of the productivity gains have come in the manufacturing sector. With output growing and total employment not following as much, this trend has been here for decades. Then I discussed the Chinese WTO factor in the equation noting that companies do seek lower cost employment and can make more money by charging less for their product. Then I added the fact that if President elect Donald Trump actually stated to go after companies that already have labor outside the U.S. then that variable can change the job situation in terms of bringing back jobs in big scale. However, President elect Trump has only talked about going after companies that fire and are moving plants away currently or in the future. In terms of creating manufacturing jobs , we shouldn’t hold President elect Trump accountable if he can’t create 5-9 million manufacturing jobs over the next 4-8 years.

      ” A more realistic scenario is that while output may continue to grow with future advances in technology, jobs in this sector will likely continue to shrink, stay flat or at best grow slowly against population growth.”

      A noted endorsement to Mr. Steve Bannon’s 1 trillion dollar infrastructure plan could provide a higher velocity of job creation in the short term, especially in areas of high unemployment of men.

  2. Logan, I agree that manufacturing has continued to increase, but capacity utilization has not. Christmas was slow for regular businesses not online. There is a weakness in demand. As that weakness manifests itself more and more, and Trump could make this even worse, there will be recessionary pressures. You are assuming other nations will continue to buy our products as they slow down as well. Eventually, labor will have to buy products and if they don’t, the products will languish.

Comments are closed.