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I used to spend
a lot of time railing against mainstream "experts," especially
economists, for their profound ignorance of real world fundamentals, poor (or
missing) analytical skills, conflicted perspectives, and emphasis on form
over substance -- not to mention the fact that most failed to see the worst financial crisis this century
coming. But not these days. At this point, I reckon most Financial Armageddon
visitors are aware of the flaws of those who claim to know what is going on,
but don't (or who do, but prefer to dish up spin and BS as fact instead).
That said, I am
always happy to highlight the work of those experts who seem intellectually
honest in their approach, who appear willing to let the data do the talking,
and who don't seem afraid of bucking the consensus. That includes Mike
Mandel, publisher of Mandel on Innovation and Growth,
whose insights I have featured on a number
of occasions. In his latest post, "New
Manufacturing Data Show Weaker Factory Recovery, Deeper Recession,"
Mandel challenges a (bullish) meme that has been gaining pace on Wall Street
and in Washington.
There’s
been a lot of happy talk recently about the revival of U.S.
manufacturing. According to an article in the New York
Times, "manufacturing has been one of the
surprising pillars of the recovery." In a Forbes.com column entitled
"Manufacturing Stages A Comeback," well-known geographer Joel Kotkin talks about "the revival of the
country’s long distressed industrial sector." The Economist writes that
"against all the odds, American factories are coming back to
life."*
Truly,
I’d like to believe in the revival of manufacturing as much as the next
person. Manufacturing, in the broadest sense, is an essential part of
the U.S. economy, and any good news would be welcome.
Unfortunately,
the latest figures do not back up the cheerful rhetoric.
Among other
things, Mandel notes that the real (inflation-adjusted) value of factory
shipments has only recouped about a third of the decline that occurred in the
wake of the financial crisis. In the meantime, he adds,
imports have
recovered far faster and more completely than domestic manufacturing. Goods
imports, adjusted for inflation, are only about 1% below their peak.
That’s according to the official data. If we factored in the import
price bias, we would see that real imports are likely above their peak.
In other words,
this so-called ’revival of U.S. manufacturing’ seems to involve
losing even more ground to imports. That doesn’t strike me as much of a
revival.
Mandel also
points to the fact that the much heralded rise in factory jobs is less than
it seems. As the following chart suggests, "the decline in hours in
manufacturing was deeper than the rest of the private sector, and the
recovery has really not made up that much ground."
Click here to
read the rest.
Michael J. Panzner
Editor, Financialarmageddon.com
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