A Skeptic's Guide to the 2012 Debate Over Manufacturing Job Losses

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The unemployment rate is more than 9 percent. Banks are swimming in foreclosures. It's no wonder that the 2012 campaign is shaping up to be about the economy. Who wouldn't want to "fix" numbers like those? Ah, but there's the rub.

Listen closely to the 2012 presidential hopefuls and it all sounds very simple. President Obama says patience is required, but we are on the right course. The Republicans say cut taxes, target incentives, cut government regulation and bigger, better growth is just around the corner.

Patchwork Nation has spent the last three years now looking at the economy - visiting communities struggling through the hard times, crunching data and interviewing local business leaders -- and we see a very different, and somewhat disconcerting, conclusion. The economic hole is immense and not easily fixed.

The economy's most pressing problem is that two critical sectors are on the rocks: manufacturing and construction. The struggles of those sectors severely damage the economic prospects of many people and places. And as those industries flounder, the outlook for people in many of our 12 county types -- and the U.S. economy as a whole -- is troubling, at least in the short-term.

So consider this a skeptic's primer on the economy. In the next few blog posts we'll explain why voters expecting the next president to turn the economy around in a big way are likely to be disappointed.

In this post: the problems for manufacturing.

The Good Old Days

On Friday, President Obama visited Carnegie Mellon University to talk about the importance of manufacturing in the U.S. economy. And for good reason.

Manufacturing jobs have long been considered a key part of the national economy. They offered people a way to a middle-class wage -- with benefits -- without a lot of education. That's why there is a lot of talk every four years about "returning manufacturing jobs to the United States" as there was in last week's GOP presidential debate in New Hampshire.

Republicans can sense a powerful issue in lost manufacturing jobs in last few years. And -- as challengers are want to do with an incumbent -- they are putting a lot of blame on President Obama.

There is some truth there. Hundreds of thousands of manufacturing jobs have been lost since Mr. Obama took office in 2009. But the decline in U.S. manufacturing is much more complicated than one president or set of policies.

Jobs are always lost in a recession. More troubling is looking back to the good old days of 2001-2005, when the economy was growing at about a 3 percent annual clip. Even in those days, the numbers were bad and the losses were spread across the country.

In the map below, red counties lost manufacturing jobs in that time period.


There is a lot of red on that map.

 

So then, in the heart of good economic times, during a Republican administration that was very much in favor of lower taxes and easier regulations, manufacturing jobs were still sharply declining in the United States. Why? Because whatever any candidate says, Democrat or Republican, the economic headwinds for U.S. manufacturers are formidable.

Technology has eliminated jobs in many cases. And growing manufacturing sectors in other countries -- China, India, Brazil -- are producing more of the goods we buy here. By some estimates China may pass the United States in terms of total manufacturing output this year. That would make the U.S. No. 2 in manufacturing output for the first time in 100 years.

And all of that means a sector of the economy we have depended on for decades is not likely to suddenly grow anytime soon.

How the Pain Spread

But some places are feeling it much worse than others. As much as the pain looks spread out on that map, for some places the question of "how do we return manufacturing jobs to the United States" is much more grave.

Consider the chart below showing those 2001-2005 manufacturing declines in Patchwork Nation's 12 county types.

Clearly, the big city Industrial Metropolis counties took the biggest hit. More than 18 percent of their manufacturing jobs disappeared in that four-year period. And in those densely populated areas that is a lot of people.

But in some ways, the losses in the largely African-American Minority Central counties, the small-town Service Workers Centers and the aging Emptying Nests are almost as bad. So much of the economies in those counties are/were built on manufacturing: 18 percent, 17 percent and 20 percent respectively. Pulling away 10 percent of the jobs that make up a fifth of your local workforce can be very painful.

Add in the fact that those counties also tend to have lower incomes than most and you begin to see how the loss of good paying manufacturing work can be a destructive force for those entire communities, as we have noted in more in-depth reporting.

There is a multiplier effect in play. Fewer manufacturing jobs means less money to spent at local stores and restaurants. And even if people in those communities get new jobs, those jobs are more likely to be lower-paying work in the service sector or the government - if those jobs haven't also been cut.

For those places -- such as the Service Worker Centers and Emptying Nests scattered around the Upper Midwest that will be key battlegrounds in 2012 -- the pain is very real and very pressing.

No Easy Answers

Perhaps, the most troubling thing about these last few years of the Great Recession is they don't represent an aberration in manufacturing. Remember the numbers here are about 2001-2005, during a period of economic growth.

The declines in the manufacturing economy are decades old and have persisted despite a host of ideas, policies and incentives. The result is large swaths of the country have deep problems that simply are not going to be easy to turn around. Even as parts of the nation "recover," others likely will struggle.

In fact, if there is a positive to this last recession, it may be that the size of the job losses might ultimately be enough of a shock to the system that these communities, and the country as a whole, will try to find to a way to fix what is a long-term restructuring and problem.

In the meantime, however, a few things seem certain. Those solutions won't be easy. They will take time. And until something is done about them, a full-scale economic turnaround seems difficult to imagine.

Comments

A Great Reset presents opportunities & challenges 4 communities

Richard Florida discusses how MFG jobs are not likely to return to the US in his book the Great Reset, How New Ways of Living and Working Drive Post-Crash Prosperity. What will be needed? Long term investments in education, and thoughtful community planning that co-locates education centers along with service-oriented jobs for the new knowledge economy. There are examples of cities already doing this and thriving. A new manufacturing base would require a commitment from the government to enable it for the new emerging technologies like renewable energy. That has taken false steps with the Obama Admin and many do not seem to support that politically.

manufacturing loss

In the twenty-first century wealth concentration is reaching new heights. Global financial stability, high speed communications, and ultra cheap transoceanic transportation allow investments in foreign markets with little risk and huge returns. The money vacuumed from the American economy by complicated investment schemes is then invested in offshore business. Our economy then takes a double hit as less money is invested in local business and manufactured goods and services are imported so even more money leaves. Unless we all want to be part of a global economy where the median income is less than $10,000 we will have to shield ourselves from outside goods and restrict outflows of investment capital. Our economy is large enough to absorb the added expense of domestically produced goods. The income multiplier will insure an overall employment and income increase. While many consumer good will rise in price this will be more than offset by the increased buying power of the average worker.

a long-term restructuring...

The first question is, on the chart Manufacturing Job Gains 2001-2005, what kind of things are being made that account for the gains?

I find the large green areas on the Manufacturing Job Gains map a puzzle. For instance, one block of green area is the arid Great Basin between the Sierra Nevada and Rocky Mountains.

Now for your thought about long term restructuring. I wonder if there is a way you could look for changes in how capital is invested and dis-invested on a county by county basis?

Since the Reagan era one critic says US capital stopped being re-invested in the businesses that produced the retained profits. The holders of the capital did something Carl Marx labelled one of the weaknesses of capitalism. The retained earnings started being deployed to chase higher yields. One could call this the onset of manufacturing maturity. It can also be labelled the financialization of capital. And finally, capital movement flexibility was a claimed benefit of the conglomerate corporation which were mentioned in the '80s as a business innovation.

So is there any way to map on a county by county basis the decline in the claimed asset value of plants and factories? Have the manufacturing assets turned into fictional tax entries while the underlying tennis shoe making machinery or textile mill machinery was disassembled and exported? Is there a patchwork nation analysis that could match two unrelated kinds of capital asset measurement and display the pattern of manufacturing plant removal?