Dean Barber

Where’d You Come From, Where’d You Go?

In Uncategorized on April 1, 2012 at 8:07 am

As we all know, sad songs and sad stories say so much. And last week we focused much of our attention on the sad stories of others, principally unemployed people in their 50s who were struggling to get back into the workforce.

But in the darkness there is light. And I have always been struck by how inherently hopeful that American people remain. There may be times when we are down, but we are never out.

So to balance the pain and suffering from last week, I offer you Bubba’s story, which reaffirms the notion that good things can and do happen to those who do not just sit and wait.  I’ll also serve up words from the cheerful traditional fiddle tune “Cotton Eyed Joe” to remind us that we are on a never-ending journey. But first, Bubba’s story:

“I was laid off in early 2009, when the employment marketplace was practically at a standstill.  March 4th was my last day.  A recruiter got me my only personal interview, which led to nothing.  I had lots of informal discussions over the phone, only one of which led to a phone interview with human resources, after which the hiring manager didn’t care to speak with me.

“Afterward, things got mighty quiet other than more informal discussions.  The inquiries & applications kept going out; weeks later, the ding e-mails came in.  I was inquiring in all sorts of industries in which I had no experience, though they were related to my prior work with alloys.  Suddenly, a small company in Texas wanted me to visit.

“At the same time, things began to click with one of the world’s leaders in aviation, defense and security.  On the 4th of June, three months to the day after my last day at the prior employer, I had my offer from the aviation company — based entirely on phone interviews, and with no prior experience in aviation and defense.  There were no relocation benefits, but I negotiated a “signing bonus” to make up for it.  Compared with my prior salary, I GAINED!  Benefits & working conditions are terrific.

“The only down side was losing 25 percent on my home when it finally sold, but that was a side-effect of the depressed marketplace. I was just glad to be back to work with a great company.  It’s approaching three years now, and the whole experience still feels surreal.  It has been the adventure of a lifetime.”

Bubba acknowledges that his story may be the exception, but he wants to inspire others not to give up. Hang in there and keep at it. Thank you, Bubba, for sharing your story.

Things Really Are Looking Up

Business Roundtable‘s first-quarter survey of 128 CEOs, released Wednesday, found that 81 percent expect sales to increase in the next six months  and 48 percent say their firms will increase U.S. capital spending.

That is encouraging news to corporate site selection consultants, of which I am one, and economic developers, who yearn for investment and jobs in their respective communities.

But these CEOs remain a cautious lot. Despite the positive outlook for sales and capital spending, less than half of them – 42 percent of  respondents – said their company will increase hiring in the next six months. Indeed. 16 percent of CEOs expect to trim staff in the next six months.

Still, it is noteworthy that large U.S. manufacturers including General Electric Co and Caterpillar Inc. have been adding workers in response to rising demand for their products. A Labor Department report last week showed new jobless claims in the United States at a four-year low.

And in my home state, the Texas Workforce Commission reports that 25,000 new manufacturing jobs were created in Texas within the past year. That’s not shabby.

Most economists would agree that the post-recession rebound of manufacturing employment has been a driver of our economic recovery. The nation had 3.7 percent more manufacturing jobs in February 2012 than in February 2010, representing a more robust rate of growth than that for overall employment, which rose by only 2.7 percent during the same time period.

So Where Did We Come From?

But to fully understand the growth in manufacturing jobs, you have to have some perspective and understand the deep hole from where we have been. A recent report by the Information Technology & Innovation Foundation (ITIF) shows that manufacturing has declined more during the last decade than it did during the Great Depression of the 1930s.

According to the ITIF report, during the Great Depression, the United States lost about 31 percent of manufacturing jobs, but in the decade of 2000-2010, we lost about 33 of manufacturing jobs. That translates to 5.7 million manufacturing jobs lost in the first decade of the new millennium. The language of the report, supported by the facts, cannot help but be a bit alarming.

“On average, 1,276 manufacturing jobs were lost every day for the past 12 years. A net of 66,486 manufacturing establishments closed, from 404,758 in 2000 down to 338,273 in 2011. In other words, on each day since the year 2000, America had, on average, 17 fewer manufacturing establishments than it had the previous day.”

My in-depth, analytical, sage-like business consultant reaction: Holy cow.

Now it is absolutely true that we have had about two years now of consistent manufacturing job growth. But keep this in mind, too, all in the name of perspective, that in January 2012, there were more unemployed Americans (12.8 million) than there were Americans who worked in manufacturing (just under 12 million).

So we labor to pull ourselves from a very deep pit. But at least we are pulling. As the old fiddle tune relates, “Where’d you come from, where’d you go? Where’d you come from Cotton Eyed Joe?”

There are certain readers of this blog who believe that I should only report on the positive news of industry. Actually, I am a cheerleader of sorts. I care very much for the manufacturing base of this country and believe it is essential for our economic health and quality of life. I will say it now and say it again: Any local economy that does not have at least a seed or kernel of manufacturing is propped on a house of cards.

Manufacturing jobs create other spinoff jobs and remain the bedrock for innovation and economic growth for the nation as a whole. I think – although I am not absolutely certain – that the president understands this and wants to create a better environment for manufacturers in the US. Let us hope so, because manufacturing is central to other sectors of the economy doing well. It is the proverbial canary in the mine.

How Big the Wave?

But am I convinced there is going to be a tsunami of US-manufacturers bringing production back to the US? Maybe a wave, yes, but not of such proportion that it will bring back all the manufacturing jobs lost. It’s not even going to be close in spite of all the rah rah talk.

The Boston Consulting Group (BCG) suggests 600,000 to 1 million new U.S. manufacturing jobs could be directly created, as a result of re-shoring operations domestically. That’s great if it happens, but I will believe it when I see it. I only hope the good folks at BCG got it right.

The ITIF report would suggest that there are structural issues at work here beyond that of a business cycle.

“At the rate of growth in manufacturing jobs in 2011, it would take until at least 2020 for employment to return to where the economy was in terms of manufacturing jobs at the end of 2007. In reality… U.S. manufacturing has been in a state of structural decline due to loss of U.S. competitiveness, not temporary decline based on the business cycle.”

My Confession

Now here is where it gets a bit difficult for your all-knowing, sage-like consultant. If I am to take this ITIF report to heart (and I think that I will as I continue to read and think about it), I may have to come to terms with perpetuating a myth. Yes, it’s true. I can get things wrong.

I have been spouting off ad nausea that manufacturing job loss has largely been the result of increased productivity. But the fact is that manufacturing’s share of our gross domestic product has fallen from 15 percent to 11 percent in 2009. That has not been true in Germany and Japan.

In reviewing the productivity of different manufacturing industry sectors, the ITIF found that 13 of the 19 manufacturing sectors (employing 55 percent of manufacturing workers) were producing less in 2010 than they there were in 2000 in terms of inflation-adjusted output.

So what does this all mean? Well, let me get back to you on that.

But seriously, what it might mean is that manufacturers in this country should invest more in their  human resources through apprenticeships and in-house training programs for us to get smarter and better at manufacturing. We’re already investing in the automated technology in order to compete. Now let’s invest in the people to run the machines.

The trend has been, with notable exceptions to be sure, for companies to have community colleges provide the needed training. The results have been a bit spotty to say the least, although it is commendable and wise for communities to invest in such programs. We will soon be telling you about a new training center in Mount Pleasant, Texas.

But the fact is that we are in an economic war of sorts and we just have to get smarter faster. The massive decline in manufacturing in our country took place at precisely the same time that there was a massive incline in manufacturing in China. Are the two related? Well, what do you think?

Duh.

Dean Barber is the principal/owner of Barber Business Advisors, LLC., a site selection and economic development consulting firm based in Plano, Texas. He can be reached at 972-767-9518 or at dbarber@barberadvisors.com  Please visit our website at www.barberadvisors.com

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  1. In addition to loss of jobs, I believe our Nation’s outsourcing of manufacturing has the unintended consequence of undermining innovation. There is wisdom in the saying “necessity is the mother of invention”. What many people do not realize is that in many cases necessity is often observed in the process of making things. And, solving manufacturing challenges leads to a culture of practical innovation. If you stop making things, a big reason for innovation disappears. Outsourcing manufacturing creates the conditions for other countries to strengthen their innovation skills and become even more competitive with America in a critical area where our Nation has historically been the envy of the world.

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