Number of hours worked has returned to pre-recession levels. Must be good news, right?

Here is a graphic showing the number of hours worked by different sectors of the economy classified by how they have fared since 2007 (just prior to the recession---Dark GRAY area).  Go HERE for the short and informative article on the topic.

I inserted a RED line to show the point of the official end of the recession (late 2009) where hours worked SHOULD start increasing for all sectors, presumably, as the recovery got underway.

Total hours worked has returned to pre-recession levels (mentioned in the article). But there has been a reshuffling of those work hours from higher paying construction and manufacturing jobs to lower paying leisure and hospitality.  A significant part of healthcare job growth is in lower paying home health aides.

Construction jobs suffered the biggest drop as a result of the recession and has held pretty steady at its low point with only a tiny increase in hours worked in the past 4 years.

I believe construction will eventually pick up, but unless manufacturing is defined in a new way I do not believe employment in that sector will increase dramatically.  Technology is the pinch there.

Construction workers might experience a boom building manufacturing plants and infrastructure but they will be staffed by machines and robotics.

Source: St Louis Federal Reserve

Nice graphic showing "breakdown costs" for the physical/material inputs for Google Glass.

The Wall Street Journal has an article today regarding IHS's "break-down cost" of the much talked about wearable technology Google Glass.

Here is a chart showing the money cost of the tangible physical inputs---the stuff you actually see and touch.

The total material costs are roughly $152.47 (Google disputes this) and the suggested selling price is about $1,500. That is quite a profit, right? Not so fast..

Source: WSJ

Here is an excerpt from the press release from IHS (underline and emphasis mine):

“As in any new product—especially a device that breaks new technological ground—the bill of materials (BOM) cost of Glass represent only a portion of the actual value of the system,” said Andrew Rassweiler, senior director, cost benchmarking services for IHS. “IHS has noted this before in other electronic devices, but this is most dramatically illustrated in Google Glass, where the vast majority of its cost is tied up in non-material costs that include non-recurring engineering (NRE) expenses, extensive software and platform development, as well as tooling costs and other upfront outlays. When you buy Google Glass for $1,500, you are getting far, far more than just $152.47 in parts and manufacturing.”  

The portion I highlighted and underlined is a fancy way of saying these are Google's "Fixed Costs" for the anticipated production of glasses. The fixed costs cited above are costs incurred by Google before they produce even one unit of the wearable technology.

When we include all these up-front fixed costs and produce one set of glasses, well, that first set will be VERY expensive---we allocate the millions spent on research and development to that one set of glasses!

However, because those costs won't change as we produce the second, third...10,000th set of glasses then you can see the "Average Fixed Cost" of producing each additional unit is going to rapidly decrease.  More of that fixed cost is going to be spread out over a larger range of production.

Eventually the fixed costs will be an insignificant portion of the total cost of producing the glasses. The only remaining cost will the the firms "Variable Costs"---materials, labor, advertising, and all other overhead. 

If we add up Google's Total Fixed Costs and Total Variable Costs of producing the Glasses and divide by number they produce we will get the "Average Total Cost" of producing them. 

Compare that number to the number over all ranges of production and subtract it from $1,500 for each unit sold to get their "accounting profit".  

The future looks bright they gotta wear....Does Google Glass come in sunglasses too?

"Manufacturing is Alive, Manufacturing jobs are Dead". Still hoping some politician somewhere will adopt this honest slogan for a campaign. See graph here on manufacturing employment

Jobs in the manufacturing (specifically, the goods producing sector), relative to other jobs in the economy, have been in decline for a long time. Now, it certainly is possible that there are more jobs in manufacturing overall BUT the number of other jobs has grown at a faster rate--hence manufacturing jobs as a percent of the total is smaller.

Well, I tried to make it look better, but I suspect this is not the case.

Remind me again why politicians spend so much political capital and ACTUAL capital trying to "save" manufacturing jobs?  I don't mean the manufacturing jobs of the future, but they are trying to rescue the jobs of the past, for the most part.

If you need a reminder from the Onion about this, please go HERE (caution---the video contains some inapproriate language!)

Maybe I am missing something. Help me out.



Source: HERE

"Manufacturing Is ALIVE and Manufacturing jobs are DEAD!!" Not a winning campaign slogan, but it is the truth...

Well, mostly true.  A new report Manufacturing the future: The next era of global growth and innovation is circulating on the econ blogoshere and it speaks of the divergence in manufacturing output relative to manufacturing employment.

IMPORTANT NOTE: This report is on GLOBAL manufacturing, NOT just the US!

Note 3 things in the graphic below.  Employment in manufacturing in 2006 was only 14% of jobs in the private sector.  Private Sector R&D in manufacturing is very high relative to other sectors, but I assume these would not be blue collar "on the assembly line" jobs. Employment in manufacturing from 1996-2006 shows a net loss relative to other sectors.

The "old" manufacturing model was how does/do management and white collar workers assist the line worker in producing the best product.

Going forward the new mantra will be how does/do management and white collar workers assist the machines/robots/ technologically advanced production lines in producing the best product.

Notice the line workers job missing in the second part?

The future....

Is our emphasis on "manufacturing" as industrial policy in 2012 really folly and based on political pandering? Does it miss the point regarding the changing nature of the modern economy? Yes, I think so. Find out why here...

Is our emphasis on "manufacturing" as industrial policy in 2012 really folly and based on political pandering? Does it miss the point regarding the changing nature of the modern economy?

I think in many ways we are chasing ghosts from the past and not looking to the future. 

The value in manufacturing increasingly takes place in the intellect and creative crevices of the mind, not in the calluses on the hands or sweat of the brow of the laborer. 

Here is an excerpt from a commentary on the topic from The Financial Times (the whole article is below).

When you look at the value chain of manufactured goods we consume today, you quickly appreciate how small a proportion of the value of output is represented by the processes of manufacturing and assembly. Most of what you pay reflects the style of the suit, the design of the iPhone, the precision of the assembly of the aircraft engine, the painstaking pharmaceutical research, the quality assurance that tells you products really are what they claim to be.

Physical labour incorporated in manufactured goods is a cheap commodity in a globalised world. But the skills and capabilities that turn that labour into products of extraordinary complexity and sophistication are not. The iPhone is a manufactured product, but its value to the user is as a crystallisation of services.

Many of those who talk about the central economic importance of manufactured goods do so from an understandable concern for employment and the trade balance. Where will the jobs come from in a service-based economy, manufacturing fetishists ask? From doing here the things that cannot be done better elsewhere, either because of the particularity of the skills they require, or because these activities can only be performed close to home. Manufacturing was once a principal source of low-skilled employment but this can no longer be true in advanced economies.

Manufacturing jobs DOWN, Manufacturing Output UP! How can THAT happen?



Source: LA TIMES

 The above graphic shows the decline in manufacturing jobs in the US. This is only half the story.  True,  employment in this sector is decreasing, but our actual manufacturing output per person is INCREASING:


Souce: Carpe Diem

This is production domestically in the US, not including "off-shored" production.  How can we have more output with fewer workers?  The use of technology in just about all phases of production is the primary culprit. Have you ever watched an episode of "How It Is Made" on The Science Channel? View some of the clips at the site and look to see how many workers there are (relatively few) and at the technology/processes that are used to perform tasks that only a few years ago required many workers to do.  The jobs lost in American manufacturing in many cases were good paying jobs that allowed for a middle-class level standard of living for millions of Americans.   

Watch these two short videos and count the number of production workers...It won't take long.