| Robert Brooks |
A year or two back I had to sort out an old office supply cabinet and found six or seven message pads – each with 50 or so sheets of notes printed to expedite the process of communicating to a colleague the time, date, and other pertinent details of who had called “while you were out.” No need for those any longer when voice mail, e-mail, instant messages, and so on, deliver news and track the data. In fact, it’s rare that there is an extra hand around the office to answer a phone and take a message. Truthfully, with current forms of communication no one is never really “out,” and no one can credibly claim to have missed a message. This is a fact of life that no one finds unusual.
It’s always remarkable – but, in fact, very little remarked — how phenomena accelerate into trends, and then either dissipate or establish themselves as commonplace. By that point, no one marvels at the change; we just acknowledge them as part of our life. This isn’t any profound insight, except recognition that there isn’t going to be a signal to confirm our economic recovery is in progress. It’s out there now, if only the trend-spotters could see it.
“The outlook is for continued moderate growth,” according to Federal Reserve Bank of San Francisco president John Williams. “Nonetheless, we have nearly 4.5 million fewer jobs today than five years ago, and the unemployment rate remains very high at 8.2%.”
The sticky fact that unemployment levels do not decrease very much obscures the fact that the U.S. economy has been growing for more than two years. The Institute for Supply Management tracks expansion and contraction by monthly surveys of numerous measurements (employment being only one) and it concludes that manufacturing activity has increased for 33 consecutive months through April, and non-manufacturing activity has grown for 28 straight months.
April was a particularly strong month for U.S. manufacturers, who posted their strongest rate of expansion in 10 months, with new orders at the highest level in 12 months, amid rising exports.
The overall economy has expanded for 35 consecutive months, according to ISM. Streaks like that are not trends; they are prevailing conditions, which means that economic growth is a small-scale phenomenon.
As I have written before, trying to coordinate employment levels with economic growth doesn’t make sense any longer — except for those economic observers who see employment as an objective of business, not a by-product of business activity. Among those are many who are especially confounded by the manufacturing recovery, which is proceeding impressively (many analysts conclude that manufacturing has fueled the U.S. economy for most of the past three years) even without the extra manpower. In fact, it’s sometimes argued that employment is a drag on a manufacturer’s growth, because it ties up capital and slows implementation of the sorts of changes a company needs to be able to make in order to expand.
Over this same period, other phenomena have evolved into commonplace, too: re-shoring is widely understood now as the shift of manufacturing from low-labor cost plants offshore to competitive domestic manufacturers. Their buyers want to be near their suppliers in order to communicate directly and more effectively, and to reduce supply time and delivery costs. Newly accessible natural gas resources have made energy remarkably affordable (and spurred expansion of that industry sector, too), which makes manufacturing operations competitive on that critical cost-factor, as well.
Other well-known cost-factors contribute to this trend, too. Product design and process simulation are faster and more reliable than ever in the past, thanks to CAD programs and network systems, including cloud-computing networks. Quality control is real-time now, and supports production cost-control in a dynamic fashion.
All of these factors are standards for the way manufacturing is done now. What is emerging is a new model of manufacturer, one that is highly responsive to customers and highly adaptive to supply and demand conditions. They’re agile, as the market demands, and they’re adaptive, as business conditions require. And each of these is more explanation of the fact that manufacturers are not hiring.
The result is that manufacturing is not the empire of operations that too many economic analysts counted on to fulfill their predictions of economic recovery, and it’s never going to provide the employment levels that they expected. But it is the standard by which we operate now — and by which we can profit, if we recognize it.