Positive manufacturing news: A well-kept secret during the election season

During this brutal election season, we hear a lot about China stealing good manufacturing jobs. The rhetoric strikes an emotional punch, especially for families who have endured layoffs thanks to jobs moving overseas. As Chris Kuehl, FMA's economic analyst, has pointed out many times, there are winners and losers in global trade, and the trade affects different companies in different ways. Regardless, it's certainly not fun being the loser.

But reality is more complex than a campaign slogan. When you look at the long view, U.S. factory jobs are on the rise. Sure, they’re down from where they were prior to the recession, but they’re on an upward trajectory. China, meanwhile, is wondering how to keep its huge population employed.

China’s shift from a producer to a consumer will be long and painful. Stateside, certain custom fabricators are probably feeling it in their purchasing departments. Customers are calling to demand the new, lower material price.

China produces half the world’s steel, and its steel industry has recently been making moves to cut steel production. Its mills reportedly produced less steel in the first two months of this year. Then, lo and behold, in recent weeks the steel price went up a bit. Will the steel price recovery last? Not really, according to many observers, mainly due to weak global demand and continued overcapacity.

In one sense, overcapacity should be the watchword for the election season when talking about manufacturing, not just for steel but in many manufacturing sectors. It’s not everywhere, but custom fabricators who serve sectors like construction equipment know the sting of large inventories of products sitting in the distribution supply chain.

Kuehl, who spoke at the FMA Annual Meeting in San Diego several weeks ago, described the problems of excess inventory in the supply chain. But he also spoke of the bigger picture—including jobs and wage growth.

Fellow speaker Michael Gregory, deputy chief economist and head of U.S. economics at Chicago-based BMO Capital Markets, pointed out positive signs in job growth, wage growth and consumer spending. “Wages have been slow to respond thus far [to the gradual economic growth], but that is changing,” Gregory said. “Wages continue to go up … I’m bullish on the consumer sector. Real income is growing solidly by 4 percent, and we’ve got 3 percent growth in consumer spending.”

Quit and job turnover rates are rising too, more signs of a tightening labor market, Gregory said, which in turn leads to rising incomes and consumer spending.

Of course, all this would make a terrible soundbite for a presidential campaign, which is probably why—especially these days—such positive news remains a well-kept secret.