Industrial Insight

we are good…

April 27, 2012
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Thursday, April 26, 2012

Phenomenal Gains in Manufacturing Productivity

The chart above shows annual real manufacturing output per worker from 1947-2011 using data released today by the BEA for manufacturing output by industry, and data from the BLS on manufacturing employment. In 1950, the average U.S. factory worker produced $19,500 (in 2011 dollars) of output, and by 1976 the amount of output per worker had doubled to $38,500. Output per worker doubled again to $74,400 (in 2011 dollars) by 1997 (21 years later) and then doubled again to $152,800 by 2010, but it only took 13 years for the last doubling because worker productivity has been accelerating. Last year, manufacturing output per worker increased to a new record high of $156,500 (see chart), and almost ten times the output per worker in 1947. In other words, the average American factory worker today produces more output in an hour than his or her counterpart produced working almost a ten hour day in 1947 – and that’s why we’re producing record levels of output with fewer workers.

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reshoring is happening…

April 27, 2012
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Report: Third Of Large Manufacturers Considering Reshoring

Thu, 04/26/2012 – 12:23pm

Decision makers at 106 companies across a broad range of industries responded to the survey, which BCG conducted in late February. Thirty-seven percent said they plan to reshore manufacturing operations or are “actively considering” it. That response rate rose to 48 percent among executives at companies with $10 billion or more in revenues—a third of the sample.

The top factors cited as driving future decisions on production locations: labor costs (57 percent), product quality (41 percent), ease of doing business (29 percent), and proximity to customers (28 percent). In addition, 92 percent said they believe that labor costs in China “will continue to escalate,” and 70 percent agreed that “sourcing in China is more costly than it looks on paper.”

The results are consistent with earlier BCG findings on

the changing economics that are starting to favor the manufacturing of certain goods in the U.S. In a report released last month, U.S. Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much?, BCG predicted that improved U.S. competitiveness and rising costs in China will put the U.S. in a strong position to add 2 million to 3 million jobs in a range of industries and an estimated $100 billion in annual output by the end of the decade.

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We fund growth…

April 23, 2012
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Our deficits fund growth…

Emerging Markets Watch
April 2012

The Elusive Equilibrium: How Financial Markets Shape Global Rebalancing

On average for the last three decades, a 1 percentage point increase in the U.S. deficit translated into a 1 percentage point increase in EM growth. Unfortunately, global rebalancing implies that process running in reverse, where declines in the U.S. trade deficit – fewer imports from the rest of the world – pull down growth in emerging market countries. Note that the U.S. deficit does not fully determine the rate of EM growth: EM countries can outperform under some circumstances, while at other times they may underperform. But the U.S. external balance historically has exerted a powerful gravitational force on the rate of growth in emerging markets, suggesting that evolving away from dependence on the U.S. requires profound structural changes in the global economy.

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April 18, 2012
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April 16, 2012

Not a Good Sign

While it is not an infallible signal, the recent trend in federal tax receipts suggests the economy is not, as Treasury Secretary Timothy Geithner claimed on Sunday, “getting stronger.” If anything, it would seem to be the opposite.

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Invest in assets…

April 18, 2012
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10 More Years Of Low Returns

Written by Lance Roberts on Monday, April 16, 2012

Here is a list of things to consider.

  1. “Buy and Hold” investing will not work. Active management to participate in cyclical upswings, and avoid the majority of downswings, will be key.
  2. “Save More & Spend Less.” Savings will make a large chunk of your total retirement nest egg. This has always been the case.
  3. “Lump Sum Invest Vs. Dollar Cost Averaging.” Accumulate cash and invest in lump sums when things have become undervalued during the cyclical bear markets. This will provide better returns over time especially when combined with an active management strategy.
  4. “Income Over Growth.” The income theme will continue to dominate investor psychology particularly in the baby boomer generation.
  5. “The Inflation Benchmark.” The real benchmark for investors to focus on is inflation – not an index. Inflation, except in rare instances, actually compounds annually – stock markets don’t. Managing portfolios to limit losses and pace inflation will be key to ensure future purchasing power parity.
  6. “Diversification.” Real diversification between non-corollary assets will be key in the future to hedge off market volatility and reduce emotional mistakes.
  7. “Real Assets.” Investing in physical real assets such as income producing properties, oil and gas wells, precious metals, private equity, etc. will perform better in a rising inflationary environment. The key here is having a “real asset” behind the investment that will retain value even in deflating market environments.
  8. “Fixed Income” Even in a rising interest rate environment actual fixed income, not bond funds, will provide income, low volatility and principal protection to portfolios. Short duration ladders that can ratchet up as interest rates rise will provide portfolios with an edge over long only equity portfolios

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we owe a lot…

April 11, 2012
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The Blog

America’s Debt Is Greater than Entire Eurozone’s (and U.K.’s) Combined Debt

11:12 AM, Apr 10, 2012 • By DANIEL HALPER

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we are the best

April 3, 2012
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Most energy efficient in the world


Professor Mark J. Perry’s Blog for Economics and Finance

Monday, April 02, 2012

2011: Most Energy-Efficient Economy in History

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China doomed to fail?

April 1, 2012
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China doomed to fail?

Op-Ed Columnist

Why Nations Fail

Published: March 31, 2012

Acemoglu explained in an interview that their core point is that countries thrive when they build political and economic institutions that “unleash,” empower and protect the full potential of each citizen to innovate, invest and develop. Compare how well Eastern Europe has done since the fall of communism with post-Soviet states like Georgia or Uzbekistan, or Israel versus the Arab states, or Kurdistan versus the rest of Iraq. It’s all in the institutions.

“Our analysis,” says Acemoglu, “is that China is experiencing growth under extractive institutions — under the authoritarian grip of the Communist Party, which has been able to monopolize power and mobilize resources at a scale that has allowed for a burst of economic growth starting from a very low base,” but it’s not sustainable because it doesn’t foster the degree of “creative destruction” that is so vital for innovation and higher incomes.

“Sustained economic growth requires innovation,” the authors write, “and innovation cannot be decoupled from creative destruction, which replaces the old with the new in the economic realm and also destabilizes established power relations in politics.”

“Unless China makes the transition to an economy based on creative destruction, its growth will not last,” argues Acemoglu. But can you imagine a 20-year-old college dropout in China being allowed to start a company that challenges a whole sector of state-owned Chinese companies funded by state-owned banks? he asks.

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And we need workers…

April 1, 2012
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March 28, 2012

The Next Scary Hockey Stick Chart

Here, we find that the federal government has sharply increased the amount of money it borrows for the sake of loaning it right back out to college students since 2008. Beginning in 2009, the net increase in those borrowings account for 2.9% of the entire increase in the U.S. national debt observed since 2008. That amount is above and beyond the amount directly added to the nation’s total public debt outstanding by the federal government’s annual budget deficits.

In this case, the disaster that would directly affect the lives of millions of people means being forced at the direction of government bureaucrats into a dramatically lower standard of living for the sake of being able to make the payments on their student loans to the U.S. federal government, without any real hope of being able to discharge that debt through bankruptcy.

That, in turn, has the real potential to indirectly hurt millions of other people, because student loan payments are rising at the rapid pace supported by the government-subsidized cost of tuition, even though college graduates are entering into jobs that pay far below what is required to both live well and to support their super-sized student loan debt.

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About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.