Depending on the agenda, various pundits, bloggers and political analysts will create a very compelling statement either for or against the strength and prospects of the US economy. This is true of almost all major categories. See what I mean?
Various cases can be made for either improving or horrifically bad jobs numbers. On one hand, the headline rate seems to either remain steady or decrease each month, approaching 8% now. However, much of this has to do with the shrinking denominator as we no longer count people that have dropped out of the workforce because they’re no longer looking. For that, some people prefer to focus on the broader measure of unemployment by using the U-6 number which is more like 15%. That makes the jobs situation look terrible, but you wouldn’t know it by our stock market returns and bond yields. At the same time though, for those with college degrees and especially PhDs and the so-called STEM majors, the unemployment rate is low single-digits. It really depends on the situation (and the agenda). By no means is the job market as strong as it used to be, but at the same time, it’s not the doomsday scenario many claim.
Manufacturing and Exports
People say we don’t manufacture anything here any more. I’ve worked in manufacturing my whole career so I know that is not the case, but I have seen a trend in moving lower complexity work to low-cost manufacturing regions and keeping higher complexity (or proprietary/new launches) in the US and Europe. Depending on the industry, sure, there’s been an exodus from the higher cost, more tightly regulated, higher legacy cost and hassle-prone US and EU regions. At the same time, many forms of manufacturing are either “coming back” or strong.
One of the drivers for manufacturing returning to the US is wages increasing in China and a higher “landed cost”, meaning you have to manufacture a product overseas and ship it all the way back. With oil prices slowly creeping back up and wage pressures in China, the spread between US costs and “the China price” is narrowing and when you factor in quality issues and supply chain extension, it just doesn’t make sense any more. Our exports are doing pretty well as well. With the emerging markets growing as quickly as they are and seeking western-style standards of living, everything from iPhones to clothing brands are flying off the shelves. In other economies, trade is doing OK as well depending on the segment. For instance, many countries in the Asia Pacific region continue to have an export boom like the commodities boom in Australia and associated Cordell Industrial Projects to help facilitate exports. As long as governments don’t start imposing protectionist trade tariffs to appease constituents at home, we may not see the hard landing in the global economy that many are predicting.