Manufacturing Tuesday

Greetings folks, beginning of the week and that means the latest edition in the Manufacturing series. I do hope everyone is doing better than our economy. The President was on television talking about jobs. He had visited a town in Indiana where the unemployment rate had reached 18%. The stimulus plan being laid before us, President Obama hopes, will eventually lead to several million jobs. But before we get to the latest on jobs and manufacturing, let's look at this week's Numbers.

The Numbers

Last Thursday, on the 5th of February, we saw the release of the latest Factory Orders figure. Now this indicator, for you newcomers, measures the growth (or shrinkage)from month-to-month in new orders for durable and non-durable goods from our nation's factories.

Now Factory Orders is also one of your lagging indicators, though given how the news has been, you really couldn't tell. Each report reflects changes from two month's ago. So right now the latest figures are for December, or more specifically changes from December and the previous month. Speaking of those latest figures, as you can probably guess, they're not good. The latest Factory Orders came in at - 3.9%. This, believe it or not, was an improvement over the previous figure of - 4.6%. Consensus was for between - 3.6% and - 8%.

On the President's speech

As mentioned prior to the jump, President Obama (man it feels good not to write "Bush" after that title!) gave a press conference last night. He spoke about creating jobs. He hinted at infrastructure investments and energy cost savings. All this was to promote the stimulus bill.

Which is all well and good. I mean it's a start, and at least he's more aggressive on the economic situation than his predecessor. God knows that all the gang at Swindlers' Inc (aka the GOP and many arch-conservatives) would be out there promoting tax cuts instead. Obama has said in the past, that infrastructure jobs and alternative energy will mean jobs. But, and forgive me to knit pick here, but did not once utter anything about trade, or that "buy American" clause, or even the word "manufacturing" in his speech.

Now this isn't bashing the President, just wishing he would have given us more details about manufacturing jobs that night. To his credit, he did bring up the situation in Elkhart, Indiana. Not to mention he wasn't shying away from the bad news on the economy. Yet many of us who supported him would like to know if all that capital going into green projects will mean American jobs?

Recently, returning from a Borders bookstore near Schaumberg, I noticed what appeared to be new construction and road equipment on some flatbed trucks. On the side of many of the earth movers wasn't Caterpillar, but Komatsu. Now I'm sure our Japanese trading partner makes excellent construction equipment. But this got me thinking, will most of the components for these wind farms or solar panel arrays be made in China? Can it be helped at this point, given that we've offloaded so much component work abroad? We should be a bit realistic and pragmantic when it comes to costs. Yet, we should also see if something done "over there" can be "imported" over here. I could go on about shady construction firms and the exploitation of illegal immigrants, but I suspect you get the picture already. Look, everyone needs work, and every country is now putting together their own stimulus/jobs bill. But do you believe that those other countries have our workers in mind?

Manufacturing jobs take a punch to the gut

Industryweek is reporting on the latest unemployment figures. The latest figures showed a record not seen since 1982. For the month of January, we lost 207,000 worth of manufacturing jobs, as mentioned, worst since '82.

Officially, this country has over 11 million people out of work, that consisted of the labor force. But of course, anyone whose read any past Manufacturing series update, knows that I've been skeptical of official numbers and have leaned towards much larger numbers. Why? Because the way the government decided who was in the labor pool and "unemployed" has changed many times. Even the experts know the official numbers are bunk!

"If you look at the details it's even weaker than the headlines numbers," said Julia Coronado, economist at Barclays Capital. Coronado said the household survey, used to calculate the unemployment rate, was even worse than the employer survey to calculate job losses. "The household survey is showing a rapid deterioration and much larger job losses, it suggests 1.2 million jobs lost which explain why the unemployment rate jumped so much," she said.

- excerpt from "U.S. Manufacturing Lost 207,000 Jobs", Industryweek, 2009

Unemployment is officially at 7.6% from the month of January. Yet if one were to include any of the previous formulations of how that figure was calculated, the number would be much higher. In fact, that number, if the good folks at Shadowstats is correct, would even be approaching 18%!

( copyright of Shadowstats, 2009)

The numbers don't really include those deemed "under-employed" or folks who just gave up looking. You add those two together, and one could speculate that "unemployment" is more like 20% easy.

More trouble at American Axle

Beleaguered auto parts maker, American Axle, was reported by Reuters that more work hours and pay will be shed. The company, like others like Delphi, have had their fortunes tied with those of the major clients. Unfortunately, those said fortunes have been on a destructive downward slope.

DETROIT (Reuters) - American Axle & Manufacturing Holdings Inc (AXL.N) has had discussions with its unionized workers in a bid to further cut hourly labor costs, people familiar with the talks said on Monday.

The supplier's push for more concessions comes less than a year after its workers represented by the United Auto Workers accepted a concessionary contract in May that slashed hourly costs by as much as 50 percent, ending a three-month strike.

- excerpt from "American Axle eyes more labor cost cuts", Reuters, 2009.

Right now all eyes are on the automakers. In a month they will have to show their viability before Congress, if they want further support. Part of that is paring down costs, and that means getting suppliers to do the same. The latter knows what happens if the Detroit 3 fail in their congressional-implied objective. That's why I think they're doing what they're doing. Business is down, and they know it could get worse.

It sucks for the workers, lets be honest here. They've already taken cuts. And given that many live in areas where other related jobs have been eliminated, chances are they know someone in their family or circle of friends who have lost a job or home. These days, it seems as if we're all racing to the bottom in hopes of just trying to hold on to what we got now.

Surprise surprise...Americans like "buy American"!

In the past few days, the news was reporting about the angst in Capitol Hill about a certain clause in the stimulus bill. That clause, dubbed "Buy American" basically stated that domestic sources should be found for the infrastructure development. This meant American-made steel, copper pipes, etc, you name it. Of course this lead to a big "OMG!" from the free-trader/Kudlowite crowd. Many in Congress were echoing what many of our trading partners were saying, that this clause could lead to an international situation.

So the government blinked, and "fixed" the provision by adding that any domestic sourcing would be aligned to any international trade commitments we made. But how does the public feel about the clause itself? They love it!

In a poll by Harris Interactive on behalf of the Alliance for American Manufacturing, Americans overwhelmingly support federal requirements for American-made materials in all federally funded infrastructure investment in the 2009 economic recovery bill.

The national poll found 84% favor "Buy American" requirements (66% strongly, 18% somewhat). Only 4% strongly oppose the requirement and % somewhat oppose it. The overwhelming support was consistent regardless of gender, age, income level, education, or region.

- excerpt from "Americans Overwhelmingly Support 'Buy American' Clause in Economic Recovery Legislation", Industryweek, 2009

Who the hell wouldn't want the stuff made in this country? Oh yeah....Larry Kudlow and his pals.



Loopholes in existing Buy American laws

Trade Reform just linked up this paper describing the loopholes in the Buy American provisions.

Loopholes are corporate lobbyists favorite tricks, either they get them in bills, in conference or in implementation of legislation.

Intel to invest $7 billion in US FABs

This is a surprising piece of good news:

Intel said the money would fund factories that use its 32-nanometer manufacturing technology to build faster, smaller chips that consume less energy. The chip giant will invest in existing manufacturing sites in Oregon, Arizona and New Mexico and will support about 7,000 high-wage, high-skill jobs at those locations -- part of the company's total U.S. workforce of more than 45,000.

Of course Intel is huge on labor arbitrage, using H-1Bs but still this is very surprising for normally they hunt the cheapest place on the globe to locate new FABs. They are very expensive to upgrade.

Given standard H-1b rates

That's still net about 1500 jobs after the recent layoffs. 2000 were lost at those locations recently, and you've got to figure 3500 of those new jobs will be going to H*class visa holders. But that leaves 3500 new hires, 2000 of which will likely be the very people recently laid off- good news indeed.

Maximum jobs, not maximum profits.

won't be immediate

and odds are by the time they get these plants operational all of those high skilled manufacturing engineers (FABs) will have had to move onto to find some other source of income.

Shame they didn't plan this a long time ago, do a temporary furlough of workers and some sort of ease of transition to retrofit the new plants.

Seriously this is a major bitch to build a FAB and even if they wanted to, they could not just "whip it together"...

but still I was shocked. I have only seen Korea and Japan building FABs in the U.S. All U.S. companies have been offshoring everything including your mother and the kitchen sink as fast as they can.

I had this

but it was revealed a week or so ago, and forgot to include. Kudos for bringing it up. But like RO mentioned, we have no idea what the H1 B situation will be with this. Hrmm....I'm going to keep an eye on this. Once more good call.

absolutely huge, kudos Intel

Seriously. This is next generation FAB, advanced manufacturing technology which is precisely the type of manufacturing the U.S. should be giving incentives, tax breaks, whatever to grab.

Also, due to national security issues and the increased dependency upon advanced's critical to keep some of this in the U.S.

But in all honesty, I am positive Intel could have manufactured these FABS elsewhere for cheaper so something just happened we need to find out more.

We need advanced laser manufacturing in the U.S. as well...we could put together a critical next generation advanced manufacturing list and promote the shit out of it actually now that I think about it...

another critical area is battery technologies. There are research areas, i.e. we still need breakthroughs, many in manufacturing techniques to reduce costs.

Biggest thing is I'm so used to blasting Intel for their inane labor arbitrage I am just stunned, with my mouth open....maybe someone somewhere is "getting it" and seeing the long term picture instead of quarterly numbers!

2 "online" by 2010

They are going to have 2 FABS up and running by 2010. Right now FABs processes are pretty much 45nm. And they are going to put a 45nm graphics processor onto the main processor.

But the biggest news here is Intel is challenging other corporations to "invest in America" and that is one change of message. Amazing.