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Why Better Manufacturing Output Isn’t Helping You


US manufacturing is absolutely in a full-blown recovery. Who would have guessed it possible given high labor rates, healthcare costs and excessive government regulations? But numbers coming from ISM, The Institute for Supply chain Management provides some welcome news: well maybe.

Just before the Labor Day holiday, the latest report was released, most appropriate.
In August the PMI registered 58.8 percent, an increase of 2.5 percent from the July reading of 56.3 percent. This marked growth in manufacturing for the 12th consecutive month and is the highest reading since April 2011. 

These gains are not isolated. Of the 18 manufacturing industries, 14 reported growth. When you drill down into the detail, one of the most encouraging measures for the future is the level of manufacturing customer inventories. They fell nearly 8% from July to August: bravo America.

August is no fluke. This sort of continuing improvement in manufacturing has been going on all year. Even the tragedy of Hurricane Harvey will provide a boost in future months when rebuilding gets underway.

Employment: Where Is My Share Of The Pie

America is creating jobs at a record pace. Are the earnings enough to pay off your debts or raise your standard of living? The answer is still not so great.

The economy has been creating close to 200,000 jobs per month for almost eight years. The job growth has been broad-based. As one economist stated, “it is easier to identify the industries not adding to their pay rolls, which include brick-and-mortar retailers and print media, which are being disrupted by technology.”

The job gains are across all regions of the country. Even the interior of the country, which was rocked by the collapse in energy, agriculture and other commodity prices is getting its feeling the joy.

The August ISM report shows the index of employment in manufacturing jumped 4.7%; that is one of the biggest categories of improvement. The current unemployment of about 4.3% would be even lower was it not for more people entering the labor force. HR departments are making news headlines in their search for qualified job applicants.

So where is your piece of this prosperity? Wages are still pretty stagnate. Sure we hear about the bidding wars for high priced talent in areas like Artificial Intelligence and other key technology areas, but what about the everyday Joes and Jane’s?

In past periods, management had the inflation rap down pat. Sorry Joe and Jane, all my costs are going up. You will have to work harder just to keep your jobs. These days the rap is all about your insufficient job skills.

Elon Musk Has The Right Idea

Beneath the glowing manufacturing statistics, one fact remains. American labor rates still compare unfavorably on a global basis. Just look to Americas next-door neighbor, Mexico.

Labor is so cheap there that even the most basic labor saving devices found in America are missing. Six-day workweeks consisting of 12-hour days are common. Even with all the corruption, it pays to locate south of the Trump Wall.

The only way to compensate for high American wages is for manufacturers is to replace labor with machines, a.k.a. robots. This is not some futuristic notion, it is happening right now and it will only accelerate in the future.

Even today’s lower paying jobs are not safe. One day instead of a semi retired person wearing a blue Wal-Mart vest, you will be greeted by a warm welcoming electronic voice named Suzie or Sam that uses facial recognition alerting you to price promotions on your favorite products. By the time Suzie and Sam arrive at Wal-Mart, they will have already made their mark at Whole Foods.

It’s happening before our eyes and one of the few voices to sound the alarm is futurists Elon Musk. With the Trump administration chatting up the idea of tax reform, it is the perfect time to address a tax on robots. The proceeds of this tax needs to provide a level of guaranteed income to tens of millions of people who will be without jobs in the coming decades. Now is the time to get started.