Contributor Since 2008
Under normal conditions, manufacturing activity in the United States no longer has any potential to support wage growth. As soon as employment reaches a level where competition for employees has the potential to result in an uptick in wages for factory workers, productive capacity is out-sourced as a means of increasing inter-job-seeker competition and reducing the likelihood of union organization amongst remaining US workers. For this reason, recent Regional Fed report indications of an increase in US manufacturing activity are not a sign of the return of US manufacturing, and there is absolutely no way that a manufacturing led return to full employment (as in an unemployment rate of less than 6%) will ever occur.
It is actually developments that affect the productive capacity of other manufacturing and employment markets that have the potential to provide some degree of stability to the US job market. [In an] announcement last week...by the National Development and Reform Commission [of China] to the effect that power costs for energy hungry industries such as aluminum, cement, steel, zinc, ferro-alloy, calcium carbide and sodium hydroxide would double from June 1st. (Burns, 2010, May 18). These increases in cost are directly related to increases in the price of coal-the primary source of energy for most of China. An increase in the cost of production in China has the potential to alter the cost/benefit analyses of multi-national manufacturers and may serve to stem the tide of out-sourcing of productive capacity from the US, thereby helping to preserve some of the jobs created by recent growth in manufacturing.
It is still naive to imagine that as the economy improves out-sourcing will stop and manufacturing will make a large-scale comeback in the US. However, the combination of US Consumers' recent distaste for goods imported from China, Oil prices that seem unlikely to fall below $60/barrel anytime soon (precluding significant cost savings for multi-national shippers) and this recent development affecting rates for electricity in China may mean that resumption of the aggressive out-sourcing of US productive capacity may slow enough to allow for a temporary improvement in our national employment picture.
Burns, Stuart. (2010, May 18). Chinese Aluminum Smelter Costs Set to Rise. Retrieved May 18th, 2010 from http://agmetalminer.com/2010/05/18/chinese-aluminum-smelter-costs-set-to-rise/
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