http://www.bloomberg.com/apps/news?pid=20601068&sid=auC5XLR6GN.o&refer=home New York Manufacturing Index Slumped to Record Low in March By Timothy R. Homan March 16 (Bloomberg) -- Manufacturing in New York contracted in March at the fastest pace on record as orders, sales and inventories plunged. The Federal Reserve Bank of New Yorkâs general economic index dropped to minus 38.2, the lowest level since data began in 2001, from minus 34.7 in February, the bank said today. Readings below zero for the Empire State index signal manufacturing activity is shrinking. The collapse in global trade, alongside a U.S. economy in its second year of recession, is causing manufacturers to pare back production as demand plummets. The subsequent payroll cuts have prompted the Obama administration to pledge to save or create 3.5 million jobs through tax cuts and more spending. âThe demand for manufactured products -- both domestically and globally -- has evaporated,â Steven Wood, president of Insight Economics LLC in Danville, California, said before the report. âThis has forced factories to substantially reduce production and employment to keep inventories from ballooning.â Economists forecast the Empire State index would climb to minus 30.8, according to the median of 45 estimates in a Bloomberg News survey. Projections ranged from minus 25 to minus 40. The measure of new orders decreased to minus 44.8 and a gauge of shipments fell to minus 26.7, the lowest levels on record. The index of inventories decreased to minus 27, the weakest since August 2001, from minus 8.1. Falling Prices The index of prices paid dropped to minus 14.6 from minus 13.8, and the gauge of prices received decreased to minus 23.6 from minus 20.7. A measure of employment improved to minus 38.2 from minus 39.1. Factories in the state turned optimistic about the future. The gauge measuring the manufacturing outlook for six months climbed to 3.1, the first positive reading in three months, from minus 6.6. Todayâs report is one of the earlier measurements of regional manufacturing this month. The Philadelphia Fed report, due this week, may show manufacturing in the region also contracted in March, according to the Bloomberg survey median. Another Fed report today is forecast to show industrial production nationwide decreased in February for a fourth straight month, according to the survey median. Manufacturing accounts for four-fifths of industrial production. Exports Slump The U.S. trade deficit narrowed in January to $36 billion, the lowest level in six years, on tumbling American demand for everything from OPEC oil to Japanese automobiles, Commerce Department figures showed last week in Washington. American exports also decreased the lowest level since September 2006, as sales of automobiles and telecommunications equipment dropped, the government report showed. The slowdown in global demand is hurting U.S. companies. United Technologies Corp., the maker of Otis elevators and Carrier air conditioners, said last week it plans to cut 11,600 jobs. Louis Chenevert, chief executive officer of the Hartford, Connecticut-based company, said in a March 10 statement that âthe economic recovery previously anticipated in the second half of 2009 now appears unlikely.â U.S. manufacturers reduced payrolls by 168,000 workers last month, following the 257,000 jobs cut in January, according to data from the Labor Department. Economists surveyed by Bloomberg News March 2 to March 9 projected the U.S. jobless rate will reach 9.4 percent this year and the economy will shrink 2.5 percent. The global economy is likely to contract this year for the first time since World War II, and trade will decline by the most in 80 years, the World Bank said last week without providing a specific estimate.
Until we fix manufacturing the economy will never fully recover. By fix I do not mean retraining workers for some other industry. That's all smoke and mirrors and has already been demonstrated to not work. Remember when everyone was going to be working in some aspect of IT. IT was all the rage during the manufacturing meltdown of the 80's. That worked out great, didn't it? Fixing it means we start manufacturing products in this country, even if it means paying higher prices. To do otherwise just seals our fate of a continuing economic decline.
We are setting up for one of the best opportunities to enter the short side - with advanced knowledge of how sick the real economy is, unlike the last episode, where a good chunk of the meltdown was caused by financial and banking issues that weren't as open and obvious (at least not to all). We are witnessing a depression-esque collapse in manufacturing and trade that can only lead to massive future, further job losses. Governments can't fix this. It's the result of human psychology at this point.
And we NEVER will... we need to accept this and adjust accordingly. When the Asian "low-cost labor genie" was let out of the bottle (NAFTA started it, remeber?), our fate was sealed. The ONLY way to make the US competitive with Asian manufacturing is to COLLAPSE the $USD. Currently, US workers expect to make, what.. $20/hr? Chinese workers will manufacture "things" for $1/hr. For the currency to decline enough to allow the US to be competitive with China would require the $USD to LOSE 95%* of its value... that means ALL OF US AMERICANS WOULD LOSE 95% OF THE BUYING POWER OF OUR ASSETS AND CAPITAL. How can we afford THAT?? *a SLIGHT exaggeration... included in the comparo would be the cost of shipping Asian-made goods across the Pacific and across the USA to point of consumption. Therefore, maybe the correct equivalent currency decline would be "only" 90%.. or 85%... but still.... WE'RE FU@KED!!
It won't happen. Price pressures on labor are so intense that Chinese factory owners threatened to close factories in a specific province that made parts for appliances and send the work to Thailand and Vietnam if the government didn't subsidize their labor costs - which were running at the rate of approximately $1.02 USD per hour. This was about 18 months ago, I do believe.
Let's have an educated, highly skilled workforce engaged in the production of cheap, uncompetitive crap. That's the ticket.
Everyone says we need to adjust. Adjust to what? Are we all going to sell insurance policies to each other? Maybe have a janitorial service? Mind you, I don't dispute your observations, but I don't know of anyone that is presenting viable alternatives to our manufacturing decline.
That's right. There aren't any. We have to accept a much lower, dumbed-down standard of everything... no choice in the matter. That's why the economic decline will be larger and longer lasting that most perceive. In a sense, we are like the American Indians when the white Europeans started spreading out across the plains... The harder we fight it, the quicker we're destroyed. Best we can do is adapt and make "things" last as long as possible. "Resistance is futile".. Globalization is a two-edged sword. We get to keep buying cheap shit at Wal-Mart.. but at the expense of losing much of our well-paying middle class economic base/jobs to Asian competitors. There are not enough "quality jobs" in the world to satisfy the demand.