Flight of the Job-cords
Posted by SCapozzola on April 4th, 2008
According to the latest Labor Department report, U.S. jobs declined by 80,000 in March, the biggest drop in five years. The U.S. manufacturing sector alone lost 48,000 jobs.
AAM’s Scott Paul said: “America shed another 48,000 manufacturing jobs in March. Since 2001, we’ve lost more than 3.5 million of these good-paying jobs. The ripple effects are being felt in communities across our nation in the form of strained local budgets, record numbers receiving food stamps, and an epidemic of foreclosures.
“The largest challenge facing manufacturing today is our unbalanced trade relationship with China. The U.S. racked up a record $256 billion trade deficit with China last year. Since 2001, our trade deficit with China is responsible for more than 1.8 million lost jobs, according to the Economic Policy Institute. Yet Washington stands by and does nothing. Congress and the Administration do not seem prepared to seriously address this job crisis by cracking down on China’s subsidies, dumping, and currency manipulation. They should, before it is too late.”
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April 4th, 2008 at 10:09 pm
Last of the Mohicans
There still exist a core of American manufacturers who have held out and were flexible enough to find ways of surviving. Because of the many new import problems confronting retailers, many are slowly re-discovering the domestic manufacturers stubborn enough and innovative enough to remain in business in the United States.
Our company, Mirrotek International (formerly known as Mechanical Mirror Works) is a case in point.
As manufacturers of mirrors and wall decor supplying the department stores and mass merchants since 1942, we found our business shrinking, as discounter and retailers went bankrupt and closed. No more Korvettes, no more Gimbels, no more Two Guys, no more Service Merchandise, no more Best Products etc.
We were still able to survive by creating new products for mail order companies and the remaining surviving retailers.
In the nineties, our base continued to shrink further as our retailer customers went increasingly to China for their products. We held on stubbornly to our manufacturing know-how. We realized that we must do something drastic, to save our business.
We opted to find a brand to license. We discovered the Iron Chef and took a license to manufacture products. This rapidly developed into our entering the food business and our having to learn something new from the ground up.
In the course of the past five years we have been successful in expanding our line of food products and have placed our products in over two thirds of supermarkets and the warehouse clubs. Our expansion of these products will see us expanding into wine and additional and unexpected avenues.
We have never given up on our core business, the manufacture of mirror and wall decor products. Unfortunately, our sales volume was too little to be successful on its own, but too much to walk away from. Besides which, sentimentally, we didn’t want to divorce ourselves from an industry that we were instrumental in for five generations.
Getting back to today, the dollar is down, oil is up, the Chinese are dropping their rebates to export manufacurers, companies in China are closing and the American retailer is finding himself up the proverbial creek without a paddle. Import prices have not only gone up, but quotes are only valid for short periods of time.
Import price increases from China are nearing 20% with no end in site. Some companies in China have found that only 20% of their employees have returned to their previous factory jobs after Chinese New Year in February.
With all this going on, we are discovering that we’re the last guy standing in our industry. Retailers are seeking us out and some are finding it very difficult to believe that people are still manufacturing in this country.
One major mail-order company when requesting quotes on our products,asked which port would the merchandise be coming from. Even after being told that we would be shipping from our factory in Passaic, New Jersey, only 10 miles from midtown Manhattan, continued his request for information as to which overseas port we would be shipping from.
As the overseas manufacturers see their costs rising, the American manufacturer will come back stronger than before.
The domestic manufacturer can supply with shorter lead times, no worry about exchange rates, normal credit terms, closeness to their customers and the ability for the retailer or final customer for recourse.
April 8th, 2008 at 6:10 am
Joe, I’m afraid that we can’t count on rising manufacturing costs overseas (driven mostly by the falling dollar) to have any meaningful impact on our trade deficit in manufactured goods. Those foreign-based companies will not stand idly by and watch their market share erode. They’ll respond by aggressively cutting costs and price to off-set any effects of the falling dollar.
Improving product quality, cutting costs, improving competitiveness and even a falling dollar will have no impact, as we’ve seen for decades, because these parameters are unrelated to the root cause of our deficit, the gross disparity in population density and per capita consumption between the U.S. and our trade “partners.” When we attempt to engage in free trade with over-populated nations, our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to our healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption.
We have been cowed by misguided free trade advocates who deride us as “protectionists” for far too long. It’s high time for the American people to stand up and demand a restoration of a balance of trade.
Pete Murphy
Author, Five Short Blasts