Episode 10: Does Manufacturing Still Matter for America?

cusp of a renaissance? That's what we'll try to take a part this week. Does anyone else pronounce it renaissances? That just see you? Dan? I think it's to do with that convict ship. Hi, and welcome back to Bloomberg Benchmark, a podcast about the global economy. It is Thursday, November five.

I'm Tory Stillwell and economics reporter with Bloomberg News in Washington, d C. And I'm joined by my colleagues and co host Dan Moss, our executive editor for International Economics Average, who is in New York today, and Akido, our editor for a Benchmark in San Francisco. Hello, Hi, Hey, guys.

So Dan, I was scouring the internet one day when I see this great article about how the Australian accent as a result of like you guys drinking too much when you first settled Australia, and that you guys speak with just two thirds capacity, with one third of your mouth muscles sedentary. There's a couple of versions of that. One is that this is the kind of English that

convicts spoke in late eighteenth century. The other version is when the first male convict ship arrived a few days before the first female convict ship, they were all going crazy. Then when the first female convict ship arrived to join the first male convict ship, there was this massive, massive night with rum and nothing was ever the same. Again, it's fair to say that some of the first European Australians were conceived that night. But that's an incredible story. Well,

moving on, I guess this is sort of related. Let's talk about babies. This was the first piece of news I saw when I woke up on Thursday morning last week, and I was so stunned I think I audibly gasped. China got rid of its one child policy last week, so now Chinese families are allowed to have up to

two kids. And this is a big deal because, like we mentioned in Our and Our China episode a few weeks back, um our guests Kenneth Lieberthal mentioned the one child policy as part of the reason why their their population growth has been slowing, and why that that's fed into overall growth of their economy. Population growth is slowing, but what's happening with the part of the population that's in the workforce that has in certain age groups already

begun to contract. And it's really consistent with one of the things ken told us that day, which is this image we've had for a long time of China as this giant, giant, giant pool of workers. It's really increasingly less true. In some ways, that policy became too successful for its own good, because as the population has slowed and the working age population has shrunk, wages in China actually have been increasing, and for many manufacturing jobs, it

just doesn't make sense to be in China anymore. There are other places you can go. Yeah, and from my proach on our Economic Indicators team, the week has been dominated by manufacturing data, and that leads nicely into our topic for today's show sure does. On this show, we've taught in previous episodes about the stronger dollar, We've talked about China. We've even talked about robots are doing to

your job. We've touched on all these topics that affect the manufacturing sector without talking and devoting a show too well manufacturing itself. What does it look like these days? Dying or on the cusp of a renaissance? That's what we'll try to take a part this week. Does anyone else pronounce it renaissanswers that just see you, Dan? I

think it's to do with that convict ship. Well, hopefully by the end of this episode will have answered this question of whether manufacturing even matters for an economy like ours, for an an advanced post industrialized economy. I think some of our listeners will be listening to this and think, gosh, I'm a teacher or a firefighter, or a lawyer or an app developer and manufacturing just sounds so twentieth century.

So will be digging into this question as well, and we will also have a very special guest to tell us a little bit more about it at the bottom of the show, so stay tuned there. But first, things. First, let's run through what the manufacturing data are saying currently. So this week we got a couple of big pieces of news, and I want everyone to put on their nerd caps for a second. Mine is always on when

talking about economic indicators. But among the first day points that where we get on the economy every month is actually concentrated on manufacturing. It's called the Institute for Supply Management Manufacturing Survey, and that name is so boring, but the information that it has is very interesting. Basically, these are just comments from purchasing managers in manufacturing, and you're

probably wondering what a purchasing manager is. Uh. Factories need a lot of supplies to make what they make, and purchasing managers are in charge of making sure they have those supplies. So if managers think there's gonna be a pickup in demand for whatever the factory makes, whatever widgets they produce, they're gonna be making sure that they have ordered more raw materials that they need to make them.

If they think there's gonna be a slowdown, they're gonna they're gonna trail off their orders for those raw materials. So these people are really at the helm of being able to monitor factory activity. So it's a leading indicator exactly, and the data goes back to so we've got a lot of history to work with, which is crucial for economic indicators. Every month, they mail up this questionnaire to

hundreds of their members and about twenty industries. These are, you know, textiles, leather, plastics, producers, and they asked them all these questions and all these like wonky things that economists want to get super specific information on. But the broad overarching index, it compiles the most important parts of that survey. That's the number that we we really like to look at first. And that index was little changed at fifty point one for October, after fifty point two

in September. So a number over fifty means that it's expanding, right exactly. It's good that it's over fifty, but it's basically kind of neutral. To give you guys a little bit more context, this main index was at fifty eight point one in August of last year, and that was right when the dollars started to go off on a tear. And there's been a few swings, but for the most part, it's just been a straight line down ever since then.

I think the good news about last month's number was a lot of people thought that it was going to dip below that fifty threshold Hockey. They thought it was going to dip into contractionary territory. That would have been very worrisome, but it kind of held on, so that was actually a small positive thing. I guess if you look at the market p m I number, that increased the fifty four point one in October from fifty three

point one in September. So I guess manufacturing isn't completely depressed right now, but it sounds like it's not doing too well either. And just to put this into some broader context tory, the Institute for Supply Lawn Management also publishes a non manufacturing index. Tell us what happened to

that this month? Right, Well, so the services indexes nine points higher than that factory gauge, and that's the widest differential since two thousands, So that just really speaks to how much better the services side the economy is doing compared to the factory side. So we really live in a services world, at least for this month. Right, So let's talk about how manufacturing got this way. Uh, let's start short term, how do we get here. Well, Tori,

you talked about the strong dollar right right exactly. We've we've seen the dollar appreciating and that makes our goods more expensive for people abroad who want to buy manufactured products. And one of the reasons why the dollar has been so strong recently is because other economies around the world aren't doing that well. And so you see this real slowdown and global demand, and that means us smaller market

for American manufacturers. And then we've also seen the energy sector kind of throw a wrench in the manufacturing industry as well. When oil prices plunge, it means that oil companies don't really need to buy more heavy equipment. They don't need to invest in more equipment to be able to access that oil or energy or whatever they're mining for um, So it hurts the factories that produced that stuff. What about longer term, Dan, it's facing issues of technology,

it's facing issues of cost. You know, we've got this global supply chain happening where a manufacturing company might happen to be headquartered in the United States, but the components for their product are manufactured in one country, they're assembled in a second, then shipped to a third for export. Now, that doesn't necessarily mean that American export as are dead or American manufacturers are dead. It may mean they're not

doing the manufacturing and the exporting from the US. I'm wondering, why do we care about manufacturing so much in the first place if our future is in services. Part of it this iconic grip it's got on the American imagination, you know, Henry Ford and the tremendous industrialization we saw in waves the nineteenth century, then again the conversion of auto plants during World War Two to produce bombers and tanks and planes that became the so called arsenal of democracy.

I think it's like farming in some ways. It has this grip on people's psyche, this view of how they feel about the country they're in, in the world they're in. Some of this services stuff can sometimes seem a little ephemeral, right right, Well, And to give you some context, manufacturing now accounts for about twelve GDP. It was almost so a big drop there. But I think to help answer your question, ay, we should bring on someone who really

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may not be appropriate for all investors. Well, since none of us on this show have actually held a manufacturing job, we have a surprise guest on the line to share her firsthand experiences. Hi. Mom, Hi, I'm good, Thanks for joining us. Oh, you're welcome. Glad that I could do it me too. We wanted to talk to you because we thought you would just have really great personal experience with the manufacturing industry and we just wanted to learn a little bit more about it from you. So to start,

how long have you worked in manufacturing. Well, I have been in manufacturing basically all my life. And we're gonna say that's rough. Really, uh, forty three years I've been in manufacturing. I went into manufacturing right after I graduated from my school. And has that been in North Carolina the whole time? Debbie, You've had a number of jobs, right. Tory was telling us that you've worked at a bunch of different factories before you actually started working at your

current company. Yes, I went into the manufacturing field. Was in nineteen and seventy two. I went into furniture and I worked in furniture for a few years, and then I twitched Ubbord and went into the hushry textile area. I did that and I was probably in the hushry textile area about fifteen years. Then I decided to venture out and try something different and I went into working

with a company that did security systems. That was with that company about thirteen fourteen years aftil I left there. I went on another adventure and I worked at a hospital, and uh, I did two different things at that hospital. One area I worked in the cafeteria and then another area is I worked within the hospital itself in another area doing housekeeping and stuff like that. But then after I left there, I went in back into the manufacturing

fields and I went into automotives. I worked there for about two years, and then now I am working in heavy equipment hydraulic maintenance. So one of the things we've talked about on this show is not just how manufacturing has changed, but how proportionately it accounts for a small share of the American workforce than it really does. Have you noticed that playout in your life and in the careers of your college. Oh? Yes, especially the area that Toy was born and raised. Then it's a little small

rural area and picker in North Carolina. It is a very important part because that is the main uh sence of the majority of the people's income there, especially the people my age and maybe the next generation down. That

was basically the thing they've done. They went, they went to school, they graduated from high school, they got married, they got a job, they got married, they had children, and back in two thousand eight nine, whenever the job market really drops, I had I've seen personally a lot of people lose their homes, lose everything they had because they lost their job. At a point when Tory was still in high school. I lost my job and I wasn't without a job for several months without a jobs. Thankfully,

we had a place to stay. But I've seen a lot of people lose their homes, and it was basically because of the furniture we in the area that we live in, Hugh cre is a big furniture market area, and a lot of the furniture companies had quit, had closed their doors, moved to Mexico, China, wherever, and people didn't have jobs. And there were a lot of those people that worked there for all their lives. I mean sometimes some people had worked our thirty five years, that's

the only job that they ever had. Thank goodness, were past the depth of two thousand, two thousand and nine. But on the ground, how much of a substantial or if any return to pre two thousand and eight has there been? Have most of the people who you mentioned found other jobs, have jobs at those same places come back, or have new employers moved in. Well that some new companies have moved in. Not very many of the all factories have moved back. There's a few that have came back,

but mostly everybody else has went to another field. Like and olso the textile, the hosi business that really drops during that time, and we really don't have a lot of textiles and hosie around here anymore. But a lot of places offered the people to go to school. And we had a program during that with the Unemployment Commission that the Employment Commission that we could go to school if you if you chose to just lant a new trade.

And a lot of people did that. But and then there's there's others that just feeling they didn't do theydn't do anything, you know, so right now they're still out there trying to find a job. I think, Mom would be really interesting to hear sort of what a typical day for you is like, because I'm not sure that too many people know. You know, what it's like to work in a factory. Um, what's it? What's it like

for you as a as a factory worker? In my position, I'm a kind of a supervisor overseer over a production area in the in the company that I work for, and I just have to go in every day and I've got to make sure that all of the I have all these the products the supplies that I need to make our our products. UH. In the meantime, while I'm doing this, I'm also running different kind of machinery that we have to do, and it's constant all the time, something to do. It's fast paced, and you've got age.

You can't be fast with your job. You're not gonna make it there along because they want people that that have space and are interested in London and want to learn. You know, Debbie, it was so interesting listening to you talk about all the different jobs that you've held that you moved from furniture to textiles, to autos to now heavy equipment, because that's really a story of the shifts

in American manufacturing over the last few decades. You can really see this move from UH less profitable, lower value added UM industries to UH something like heavy equipment that's a lot more profitable and involves higher technology. I guess, but I was wondering, did you ever have to go back to school to transition between these jobs or get additional training? Personally myself, I have it, but I have known people that how went back to school so they

can learn how to runch machines and stuff. And when they've returned from school, have they kept their employment at the same place. Yes, and they usually get a bit of a real nice pay rate when they actively complete their schooling, because that's why they send them to schools to learn how to operate a very high tech machine. Is the common person coming off the street can't run it, and you have to go to school to to know how to maintain, how to operate it, and everything about it. Dad,

we've been wrestling with two competing narratives. One says that manufacturing in the US is back, there's this manufacturing renaissance. Then on the other side of the fence, you've got a school of thought that says manufacturing is really history in the US. So from your perspective, which is true, Well, from perspective, I believe it could be in the middle. Right now, I think manufacturing is still a part of our lives and in and it will be for a while.

But I think further on down the road to say, like by the time maybe tories forty or so, maybe when is that exactly, Let's say, five, ten or twenty years. I'm not fifteen or twenty years down the road. Uh, I could I could see it, Bason now, Well, Mom, yes, thank you so much as anyone else have any other questions, Debbie, I have one more question, how the skill of once attend? How proud are you of Tori for being an internationally famous podcaster? That would be a one chen very very

proud of Toy. I am so glad that she decided to go to college and do what she does and not be living there because her generations, the ones that live there, they're falling in the same the same mode that their parents and their grandparents are there out here trying to find a factory job, you know. And that's that's one thing I'm proud of about Tory. But when Tori was a little girl, I came home one day and she said, when I grow up, I'm not working for Peanuts. And I said what, And she said, I'm

not working for Peanuts when I grow up. And she followed her green and her boat. And I am very proud of her. We're coming up to annual review time. I'll keep I'll keep the I'll keep the Peanuts thing in mind for Tories. I mean, just that laugh alone is worth being proud of it. I don't believe there's another Laft in the world like that. Laft. Well, thank you so much for joining us today. It's been a real privilege to have you on the show. Has been

a privilege to talk to you all too. All right, Mom, love you, thank you, love you too, and talk to you later. Okay. Bye. So I guess to answer your question Aki, that you posed at the beginning of the show, I would say, yes, manufacturing does still matter in America. Thanks again for listening to Bloomberg Benchmark. We will be back next week and until then you can find us on the Bloomberg Terminal and Bloomberg dot com, as well

as on iTunes, pocket Cast, Stitcher, Google Play. And while you're there, take a minute to rate and review the show so more listeners can find us. And a very special thank you to Debbie. Let us see what you thought of the show. You can talk to us and follow us on Twitter at Aki epos seven, Acrey still Well and Daniel mass d C. Thanks again. We'll see you next week, hopefully we can talk this one. PS two pass by pas best pass stor