Monday, October 4, 2010

Manufacturing UP! GOOD! Manufacturing employment DOWN! Not so good...Will it ever recover?

A machine shakes almond trees in an orchard in Buttonwillow, Calif. (Al Seib, Los Angeles Times / October 4, 2010)
 The graph below shows manufacturing output (right axis) relative to employment in the manufacturing sector (left axis) in the US from 2006 to the present.  The decoupling of these two variables starting in early 2009 is quite dramatic.  Manufacturing output is increasing at an increasing rate which is GREAT, but it was starting out from a pretty low base at the beginning of 2009.  The big question from this is: Is manufacturing employment going to recover and get back to what it was, even in 2006 or are those jobs, relevant just 3 years ago, lost forever?  Please see the excerpt from the LA Times below the graph for a real life look at one industry in California....Take note of the quote in red--this will be well discussed in AP Microeconomics in the Spring...(HT: Carpe Diem)   
Source: Carpe Diem (where else??)

The following comes directly from HERE:
From today's LA Times: Automation is increasingly reducing U.S. workforces

"Forced to cut costs during the recession, employers across the country are looking at ways to avoid hiring. They've accelerated use of computers and technology, replacing administrative assistants with software, cashiers with self-service kiosks and laborers with machines.

These structural changes mean some jobs that disappeared during the recession may never come back. Productivity gains are good for company profits and help the economy grow over the long run. But in the short term, the shift is exacerbating America's jobless recovery.

"Recessions tend to act as ratchets; they'll often speed the pace of fundamental changes that were going on in the economy anyway," said Erica Groshen, vice president and director of regional affairs at the Federal Reserve Bank of New York.

Ditching workers is an appealing prospect to many California farmers. Few states have minimum wages higher than California's $8 an hour. The heightened focus on workers' immigration status has increased farmers' administrative burden.

With the help of machines, though, growers can continue to boost output while reducing headcount. Farm labor in California has fallen 11% over the last decade, yet cultivation of heavily automated crops soared over the same period: almond production has more than doubled, to 1.6 billion pounds.

"If cheap technology is available, you substitute technology for people," said Allen Sinai, chief global economist at Decision Economics in Boston.

Automation has been a steady progression since the Industrial Revolution. Still, laying off workers is never easy. Recessions give companies a motive to move more swiftly than they otherwise might have to cut staff, outsource work to cheaper locations and implement labor-saving technology, Sinai said. When sales pick up, companies can help profits rise quickly by keeping a lid on hiring.

That's part of the reason that earnings at some large companies have soared over the last year while job creation has lagged behind. In August, U.S. private sector employers added 67,000 jobs, far fewer than the 100,000 needed to keep pace with population growth."
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