MECHANICAL CONTRACTING BESCHLOSS BEAT
Manufacturing/construction reflect U.S. economic extremes
BY MORRIE BESCHLOSS CONTRIBUTING WRITER “I 44
t was the best of times — it was the worst of times." This opening line from Charles Dickens’s A Tale of Two Cities is particularly apropos when summarizing
the outlook of America’s overall production economy. Manufacturing and construction form the extreme bookends of today’s U.S. economic scenario. The manufacturing sector, which had been hammered
by the implosion of its major sub-sectors (automotive, steel, fabricated metals, textiles, electronics, etc.), caused by mounting foreign competition, jobless production technology and the accelerating pace of obsolescence, since reaching its peak in the 1970s, had been given up for lost,
even before the September 2008 recessionary crash.
Capital goods expenditures, a major indicator of the industrial sector’s outlook for the U.S. future manufacturing growth, continued their upward climb in March, as a broad range of sub- sectors such as machinery, metals, computer software and chip makers expanded their outlays substantially.
Construction, on the other hand, seemed to be headed
for the proverbial stratosphere at that time, as residential, commercial and industrial construction vied for the attention of thousands of developers, who saw no end to this giddy expansion from the 1980s and well into this century’s first decade. With the rapid growth of America’s population during
this period and a government encouraged tax-advantage belief that every family should own a home, the residential component kept setting new records, with no end in sight. This eventually created the destructive financial underpinnings resulting in the all-encompassing
“great recession.” “Flipping” became a national pastime, as home prices
seemed to double every five years and money could be made by house buying and selling. The current construction depression impacting the
residential market and, to a lesser extent, the commercial and industrial markets, has degenerated into a vast wasteland, exacerbated by a nationwide shift to renting over owning. In addition to America’s manufacturing leadership in
heavy construction machinery (Caterpillar), commercial and military aircraft (Boeing) and materials-handling
equipment (United Technologies), the renaissance of manufacturing has also been driven by exports, especially the unprecedented expansion in the Southeast Asian quadrant and the world’s unquenchable thirst for armaments, of which the U.S. provides more than the rest of the world combined. This has also led to a reverse in manufacturing job
hemorrhaging, which had been a decades-long phenomenon. The manufacturing sector now finds itself in the unique position of steady hiring, despite its ability to generate record jobless productivity. This has tripled production effectiveness in the last forty years.
Capital goods expenditures reflect industrial muscle-flexing
Capital goods expenditures, a major indicator of the
industrial sector’s outlook for the U.S. future manufacturing growth, continued their upward climb in March, as a broad range of sub-sectors such as machinery, metals, computer software and chip makers expanded their outlays substantially. This surge has come close to reaching the monthly
capital expenditure output of non-defense revenue spending, which reached its all-time peak of $70 billion in December 2007. Shortly thereafter a steady decline set in, heralding the subsequent recession in the overall economy as well. But where the previous pre-recession years saw the
topping out of heavy industry capital spending in particular, the huge amounts of cash accumulated since 2008 have given corporations the wherewithal for a resilient capital rebound. These growing capital expenditures not only signal
America’s manufacturing industries’ growing optimism but they also negate the expectation that personnel hiring will be an automatic side effect of the sub-sectors anticipating a substantial growth potential. As the post- recession manufacturing arena is already displaying indications of better than expected strength from the industrial sector, the incubus of unemployment will continue to hover heavily over the slowly expanding recovery. In attempting to project the potential employment
recovery, the current post-recession environment provides little indication of absorbing the approximate 26 million personnel now out of work, working part-time or those that have just given up. The ongoing technological revolution actually militates against the type of employment recovery that has accompanied the aftermath of previous recession recovery comebacks during the last 60 years. Best estimates of personnel availability for nationwide
job openings indicate that little improvement has taken place to remedy the 5 to 1 ratio of job seekers to work openings that existed a year ago. At its lowest ebb, the ratio was 6 to 1 in late 2008. The accelerated expenditures made possible by improved manufacturing technology are actually eliminating the need for hands-
e Turn to PVF on p 46
phc june 2011
www.phcnews.com
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