Posts Tagged ‘Manufacturing’

The Fed Thinks Higher Prices Are Good For You

Monday, April 10th, 2017

The Federal Reserve Board’s quantitative easing program was an unprecedented monetary experiment that dumped trillions of dollars of new money into the economy.

Historically, adding that much money to the economy should have caused hyperinflation, but the economy was so weak, it took the Federal Reserve Board eight years of loose monetary policy to boost the U.S. inflation rate to 2%.

Now, though, some Fed members think that 2% isn’t enough.

Readers old enough to vote during the Carter and Ford years remember when the Fed’s role was to lower inflation, not raise it. In 1974, inflation hit 11.03%, and from 1979 through 1981 inflation reached 11.22%, 13.58% and 10.35%. In the Ford era, Whip Inflation Now (WIN) buttons were created. They did little to control rising prices.

We haven’t seen any Boost Inflation Now buttons, fortunately, but helping the economy by increasing inflation is the dumbest idea since negative interest rates. Given the Fed’s recent history, that may be its appeal. (more…)

More Government, Less Manufacturing

Monday, August 29th, 2016

As the first country to mass produce everything from automobiles to computers, America has a well-deserved reputation for innovation, thanks to its manufacturing sector. U.S. government employees, conversely, are most adept at producing paperwork, as we’ve previously noted.

So which sector do you think employs more people in the U.S.—those who produce or those who bog down production with new regulations?

The answer—and it’s not even close—is that government employees outnumber employees working in manufacturing. In fact, as of a year ago, there were 21,995,000 government employees and 12,329,000 manufacturing employees.  That’s 1.8 government employees for each manufacturing employee, or one employee to produce and nearly two employees to regulate.manufacturing_and_government_employees-1939-2015

Granted, not all government employees are regulators and many serve valuable roles … but is it healthy for the economy to have nearly twice as many employees working in government as we have working in manufacturing?

It didn’t used to be this way. Until August 1989, manufacturing employees outnumbered government employees. But that month, government employed 17,989,000 and manufacturing employed 17,964,000. The two sectors have been going in opposite directions ever since. (more…)

Key Indicators Negative Across The Board

Friday, May 17th, 2013

The worst things get, the more they stay the same.

As the stock market continues to set records, the latest Philadelphia Fed Business Outlook Survey shows that the business outlook for manufacturing is weakening.  Of course, that could help continue to boost the market, since it gives The Fed an excuse to continue its quantitative easing.


WOW! Manufacturing Index Up 0.2%!

Friday, November 2nd, 2012

“Been down so long, it looks like up to me.”

Furry Lewis

This is what passes as positive economic news these days: The Institute for Supply Management’s (ISM) reported Thursday that its index of purchasing managers edged up to 51.7% from 51.5% in September.

Wow!  A whole 0.2% gain!

Yet it was positive enough to send the Dow Jones Industrial Average up 1% (136.16 points) yesterday, in the last Thursday before the Presidential election.

It was the biggest gain since the latest round of quantitative easing (QE3) was announced on Sept. 13, 2012 – but it doesn’t erase the market drop that has taken place since then.

The gain in the ISM index is up from a three-year-low of 49.6% in August and it’s better than the 50.5% index projected by economists in a MarketWatch survey.

But put the figure in perspective.  Any number above 50% signals expansion, while a number below 50% means contraction.  Whether the number is 51.7%, 50.5% or 49.6%, it signals that the economy is standing still.  Statistics have a margin of error, which renders a gain or a loss of 0.2% meaningless.

Let’s assume, though, that the trend is upward.  After all, ISM’s new order index, which is based on future sales, moved up from 52.3% to 54.2%.  If the growth rate for September continues, after five months, the index could reach 51%!

That’s about as exciting as the 2.1% growth in gross domestic product (GDP) that we reported last week.

Economic Data Doesn’t Create Jobs

Speaking of meaningless statistical changes, the bigger news, reported today, is that the unemployment rate ticked back up to 7.9% from 7.8%.

Just last month, the U.S. Bureau of Labor Statistics, amid a great deal of skepticism, announced that the unemployment rate had fallen below 8% for the first time in nearly four years.  So much for positive trends.

Many even viewed the latest data as positive news, as 171,000 new jobs were added in October, which is higher than the expected 125,000 new jobs.  Regardless, there are not enough new jobs being created to make a dent in the unemployment rate.

As with the ISM index, it doesn’t matter much whether the jobless rate is 7.9%, 8.1% or 7.8% — especially given that it counts part-time workers as being fully employed and doesn’t include people who have given up looking for work.

The take away from this is that too many people have been out of work for a long, long time, and that stimulus programs, monetary policy and other government efforts have done little to change that.