US Manufacturing Activity in a Recession Amidst the Trade War

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#1  Edited By mattbbpl
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Highlights:

  • The ISM U.S. manufacturing purchasing managers’ index came in at 47.8% in September, the lowest since June 2009.
  • This marks the second consecutive month of contraction.
  • The new export orders index tanked to only 41%, the lowest level since March 2009.

A gauge of U.S. manufacturing showed the lowest reading in more than 10 years for September as exports dived amid the escalated trade war.

The U.S. manufacturing purchasing managers’ index from the Institute for Supply Management came in at 47.8% for September, the lowest since June 2009, marking the second consecutive month of contraction. Any figure below 50% signals a contraction.

The new export orders index was only 41%, the lowest level since March 2009, down from the August reading of 43.3%, ISM data showed.

“We have now tariffed our way into a manufacturing recession in the U.S. and globally,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

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Manufacturing activity growth has been slowly declining for a while now amidst the trade war, and this marks the second consecutive month of contraction for the reading, in line with longer term trends. This is unlikely to be an outlier - our manufacturing sector is shrinking.

October ISM activity edit:

October's ISM figure was released today. Manufacturing output contracted further this month (marking the third consecutive month of contraction).

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#2 HoolaHoopMan
Member since 2009 • 11039 Posts

Well Trump better ready another round of tariffs on Vietnam, Bangladesh, Mexico, etc. Here's to eliminating every feasible outsourcing location with taxes on consumers/businesses!

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Nuck81

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#3 Nuck81
Member since 2005 • 7907 Posts

The only promise Trump has kept, is to try and undo everything Obama ever accomplish

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#4 LJS9502_basic
Member since 2003 • 167965 Posts

Bu bu but China suffers.

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#5 mrbojangles25
Member since 2005 • 45029 Posts

This is truly tarrifying...

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#6 LJS9502_basic
Member since 2003 • 167965 Posts

@mrbojangles25 said:

This is truly tarrifying...

That's groan inducing dude...…….:p

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Zaryia

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#7 Zaryia
Member since 2016 • 10420 Posts

Republicans bring recessions, Dems fix it. A long cycle now.

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#8 mattbbpl
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@mrbojangles25: "tarrifying"

Lol!

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#9 phbz
Member since 2009 • 4786 Posts

It's like electing a demented old guy that had a long track record of bankruptcies, even before he became demented, was not a good idea.

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#10 joebones5000
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Another Trump failure, yet somehow 40% of the country manages to come up with excuses to support him. Wow.

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#11 Horgen  Moderator
Member since 2006 • 121727 Posts

Another month or two before it is considered a recession?

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#12 comp_atkins
Member since 2005 • 36027 Posts
@horgen said:

Another month or two before it is considered a recession?

recessions are generally measured on declines in overall GDP, not declines in a specific sector.



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#13  Edited By mattbbpl
Member since 2006 • 17664 Posts

@comp_atkins: correct

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#14  Edited By KungfuKitten
Member since 2006 • 26935 Posts

If there is one thing I disagree with with Trump, it's the way he handles the trade agreements/tariffs.

At first I was confused why Trump attacked almost a quarter of all the countries on Earth with tariffs before attacking China. (Why antagonise countries that could have helped you there.) And then I thought: Maybe if we had helped Trump raise tariffs against China, he wouldn't have been able to raise tariffs against those countries without seriously hurting his relationship with those countries. But I feel like his mission against China was a misfire because the USA is on its own now and China don't care.

And now we have this Boeing and Airbus thing going on. Keep in mind I am no expert on these matters and if I got any of this wrong I would LOVE to know. This has been going on for over 15 years, now. Basically as I understand it, the USA accused the EU of illegally subsidising Airbus resulting in unfair competition with Boeing. And the EU accused the USA of illegally subsidising Boeing. The WTO (I think) investigated this and these two cases have been drawn out for a very long time (like 15 years). In the meantime the USA and the EU continued (of course...) to illegally subsidise Boeing and Airbus respectively. So as far as I can tell, aside from the degree to which they did this, there are no good guys in this story.

This October, the WTO will cast their verdict on these two cases. They told the USA they can raise x billion in tariffs against the EU. (7.5?) October the 18th the WTO will tell us how much the EU can raise in tariffs against the USA. Which (from hearsay in local Dutch politics) is bound to be a higher amount, depending on what is taken into account? (NASA?)

What happens? These tariffs would be bad for the USA and the EU economy, both. Trump still raises the tariffs, as soon as he can. Why? I think it's because Trump is concerned that the EU would have raised their tariffs on October 18th, which would have placed him economically in a disadvantaged position by not raising the tariffs when he could. The EU may have been able to raise higher tariffs than the USA without getting into trouble with the WTO and that would have looked bad for Trump. And now he can at least sound like the good guy and the one in control... for a couple days.

But what will happen on October 18th? I think the EU wouldn't have raised tariffs at all. In fact they still have x billion (I think close to 4) from old cases that they could have raised in tariffs against the USA. And they didn't. But now that Trump did raise tariffs, you bet ya, the EU most definitely will (at the very least) match Trump's tariffs. Or let's say I would be extremely surprised if they did nothing. They're not e-peen warriors, and they love money... but I don't think they're going to want to play the role of the punished child here. I think that's taking things too far for the EU. Instead I think they will act all perplexed and say something like: "How can Trump just raise tariffs on us." I bet. And: 'We'll have to send a strong message that this is not how you treat your allies.'

Which is interesting because AFAIK we're talking about two sides that have both been very naughty for 15+ years trying to get one over on each other's control over the aerospace market, and both acting like they're SO innocent, and both hurting their own economies by having this little press-battle. I think I understand why Trump did it, but I'm not so sure he should have done it.

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#15 R-Gamer
Member since 2019 • 1157 Posts

@zaryia: You apparently don't know what a recession is.

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#16 Horgen  Moderator
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@comp_atkins said:
@horgen said:

Another month or two before it is considered a recession?

recessions are generally measured on declines in overall GDP, not declines in a specific sector.

Ah, forgot. I thought it was somewhat timebound as well, so not every correction is suddenly a recession as well.

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#17 comp_atkins
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@horgen said:
@comp_atkins said:
@horgen said:

Another month or two before it is considered a recession?

recessions are generally measured on declines in overall GDP, not declines in a specific sector.

Ah, forgot. I thought it was somewhat timebound as well, so not every correction is suddenly a recession as well.

yeah, there is some filtering. the rule of thumb is 2 consecutive quarters of shrinking GDP.

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#18 Horgen  Moderator
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@comp_atkins said:

yeah, there is some filtering. the rule of thumb is 2 consecutive quarters of shrinking GDP.

Two quarters, thought it was enough with one.

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#19 comp_atkins
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@horgen said:
@comp_atkins said:

yeah, there is some filtering. the rule of thumb is 2 consecutive quarters of shrinking GDP.

Two quarters, thought it was enough with one.

my guess is they want to ensure 1 bad quarter is not a fluke before it's officially a "recession"

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#20 sonicare
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Unfortunately our manufacturing sector has been shrinking for quite some time. Not sure how it's fixed as globalism has drawn off a lot of it. It's simply cheaper to make stuff overseas. How do you fix that?

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#21 mattbbpl
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@sonicare said:

Unfortunately our manufacturing sector has been shrinking for quite some time.Not sure how it's fixed as globalism has drawn off a lot of it. It's simply cheaper to make stuff overseas. How do you fix that?

Not true. With the exception of a brief decline in 2015, manufacturing output has been increasing since 2009.

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#22 sonicare
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@mattbbpl said:
@sonicare said:

Unfortunately our manufacturing sector has been shrinking for quite some time.Not sure how it's fixed as globalism has drawn off a lot of it. It's simply cheaper to make stuff overseas. How do you fix that?

Not true. With the exception of a brief decline in 2015, manufacturing output has been increasing since 2009.

Well, I guess it depends on what you're talking about. manufacturing jobs have steadily been declining, but due to automation and other factors, output is actually up.

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#23 mattbbpl
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@sonicare: Right. Output has been increasing. Now it's decreasing.

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#24 joebones5000
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I'm sure manufacturing and coal jobs are going to come back soon. Trump supporters tell me both industries are growing under Trump.

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#25 t-unit
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Economic cycles boom and bust, we've been booming for 9 years now, the cycle is almost up for manufacturing. The trade war with China has done nothing to help manufacturing (or retail) but it's like ripping a band aid off slowly vs quickly.

Do tariffs work? IDK, Trump is using them as negotiating tactics. "Hey, if you don't take this great, beautiful deal, then the tariffs are gonna go up... YUGE!"

I think there are a lot of underlying issues tho with US manufacturing. Experienced workers are retiring, the US automakers are dropping commuter cars from production, whilst focusing on making SUV's and pickups that cost as much as a house.

Seriously, the prices for pickups are crazy. A basic 2 wheel drive with a weak engine will run you 30 grand, but add 4 wheel drive and any special trim and it's 50 grand. If you were getting good quality with that 50 grand, I'd say all is good, but you're not getting good quality. Ford is turbo'ing all their engines, which shortens engine life, and Chevy is putting some dumb active fuel management stuff in their engines, which adds complexity to them and can flat out destroy them if something goes wrong.

Sorry, but I'm not blowing 50 grand on SUV's and trucks that are basically built to fail and it's all in this vain attempt to get better fuel economy. You save maybe 1 MPG, but in return when these vehicles fail, you pay thousands in repairs. Yeah, save $100 in gas a year and in 10 years pay 5 grand to replace your engine... real winning strategy there.

Went on a bit of a rant there, apologies. Anyway, the biggest issue manufacturing has is they are struggling to find skilled workers who are willing to work for $17 an hour or less. Manufacturers are trying to cut costs as much as possible and they've done as much as they can short of reducing their payroll, but the past 20 years it's a race to the bottom with wages.

I've been in manufacturing for almost 10 years now and I'm looking at getting out. Opportunities are few and far between, the work is getting less advanced and tedious, and the only people who get hired to higher paying gigs are those 20 years older than me. It's a dead end, companies don't promote from within and normally you advance by leaving for another company... but nobody is hiring anyone for over $20 an hour that's under that age of 40.

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#26 t-unit
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@sonicare said:

Unfortunately our manufacturing sector has been shrinking for quite some time. Not sure how it's fixed as globalism has drawn off a lot of it. It's simply cheaper to make stuff overseas. How do you fix that?

Switching to a services based field. Cheap Chinese labor can't cut your grass, fix your air conditioning, fix your car, etc.

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#27 comp_atkins
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@joebones5000 said:

I'm sure manufacturing and coal jobs are going to come back soon. Trump supporters tell me both industries are growing under Trump.

indeed

https://www.foxbusiness.com/energy/coal-giant-murray-energy-seeks-bankruptcy-protection

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#28 Nuck81
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@t-unit: Hell yeah man. The middle class is going to make a roaring comeback by mowing each other's lawns for $10 a pop.

Trickle down economics works!!

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#29 comp_atkins
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@Nuck81 said:

@t-unit: Hell yeah man. The middle class is going to make a roaring comeback by mowing each other's lawns for $10 a pop.

Trickle down economics works!!

i think the point being don't go get a job that can be easily outsourced.

there are decently paying service type jobs that require a person on location.

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#30  Edited By Nuck81
Member since 2005 • 7907 Posts

@comp_atkins: So take low paying jobs.

Gotcha.

Middle class coming back living off $11 an hour!!

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#31 comp_atkins
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@Nuck81 said:

@comp_atkins: So take low paying jobs.

Gotcha.

Middle class coming back living off $11 an hour!!

is your plan to force manufacturers to pay entry-level low skilled employees $40/hour when they get get the same work done for 50% the cost overseas? how should we do that? apply high tariffs on imports from china to try to force cost parity? subsidize manufacturing salaries w/ taxpayer money?


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#32 Nuck81
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@comp_atkins: No, take away all Tax from the Rich.

Raise taxes on the Middle Class.

Lower wages, eliminate min. wage.

Reduce the middle class and lower class spending power, while funneling all profits and cash to 1%.

The 1% will start to invest their money and the middle class will wait patiently for the drippings.

MAGA!!!

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#33 comp_atkins
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@Nuck81 said:

@comp_atkins: No, take away all Tax from the Rich.

Raise taxes on the Middle Class.

Lower wages, eliminate min. wage.

Reduce the middle class and lower class spending power, while funneling all profits and cash to 1%.

The 1% will start to invest their money and the middle class will wait patiently for the drippings.

MAGA!!!

but you didn't actually answer my question, instead responded w/ some nonsense.

it's ok to not know how to fix things. if it were simple it probably would have been done already.

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#34 Horgen  Moderator
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@comp_atkins said:
@Nuck81 said:

@t-unit: Hell yeah man. The middle class is going to make a roaring comeback by mowing each other's lawns for $10 a pop.

Trickle down economics works!!

i think the point being don't go get a job that can be easily outsourced.

there are decently paying service type jobs that require a person on location.

*Yet, perhaps.

Didn't Bill Gates share some thoughts a few years ago about a machine/robot tax?

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#35 mattbbpl
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@horgen: I'd argue that the robot tax competes with trickle down economics and austerity during a recession as the worst economic idea with current us political party support.

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#36 Kadin_Kai
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@t-unit: Well said! But I want to add, a manufacturing sector can grow, while simultaneously employment in that sector can decline.

The reason is technology, that is probably the biggest killer of US manufacturing and the same applies in China and elsewhere.

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#37 comp_atkins
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@kadin_kai said:

@t-unit: Well said! But I want to add, a manufacturing sector can grow, while simultaneously employment in that sector can decline.

The reason is technology, that is probably the biggest killer of US manufacturing and the same applies in China and elsewhere.

yup. productivity increases but demand for labor decreases. as it's been for centuries.

humans are both very clever and very lazy so we invent great ways to get us out of doing more work.

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#38 theone86
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@comp_atkins said:
@Nuck81 said:

@t-unit: Hell yeah man. The middle class is going to make a roaring comeback by mowing each other's lawns for $10 a pop.

Trickle down economics works!!

i think the point being don't go get a job that can be easily outsourced.

there are decently paying service type jobs that require a person on location.

Yes, that was what all my academic advisors in high school were saying, "be sure to order your future profession around the inability of employers to outsource your labor."

Besides, it's not like everyone is physically capable of performing all of these "outsourcing-proof" jobs to begin with. If all of the high-paying jobs are going to be in, say, plumbing, then there are going to be a lot of disabled individuals who won't be able to get a high paying job at all. On top of that, if everyone all of the sudden starts moving en masse towards these jobs then they're not going to be high-paying for very long due to supply and demand. Finally, there are plenty of jobs that are "outsourcing-proof" that aren't paying very well as it is. Personal care aides, for instance, can't be outsourced and are in high demand, yet make an average salary of around $20,000. Teachers are supposed to be "outsourcing-proof" yet in some states the average teacher salary is less than $50,000. Oh, and landscaping? Average salary is $25,000.

The real wage growth has been in skilled labor, period. The surest way to ensure people are paid decent wages is to send them to college. The surest way we sent them to college in the past was to pay workers decent enough wages so that they could send their kids to college. If we're not going to pay workers enough to be able to afford their kids education and we're not going to pay unskilled workers enough to make a comfortable living then we're going to end up with asymmetrical standards of living no matter how "outsourcing-proof" jobs are. Regardless of how much they're paid for on-site labor, they're still competing with educated elites whose high-powered salaries drive up inflation and can be used as leverage against their potential earning power.

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#39  Edited By mattbbpl
Member since 2006 • 17664 Posts

@theone86: Those aren't protected jobs, though. You need a gatekeeper limiting entry into the field

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#40 comp_atkins
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@theone86 said:
@comp_atkins said:
@Nuck81 said:

@t-unit: Hell yeah man. The middle class is going to make a roaring comeback by mowing each other's lawns for $10 a pop.

Trickle down economics works!!

i think the point being don't go get a job that can be easily outsourced.

there are decently paying service type jobs that require a person on location.

Yes, that was what all my academic advisors in high school were saying, "be sure to order your future profession around the inability of employers to outsource your labor."

Besides, it's not like everyone is physically capable of performing all of these "outsourcing-proof" jobs to begin with. If all of the high-paying jobs are going to be in, say, plumbing, then there are going to be a lot of disabled individuals who won't be able to get a high paying job at all. On top of that, if everyone all of the sudden starts moving en masse towards these jobs then they're not going to be high-paying for very long due to supply and demand. Finally, there are plenty of jobs that are "outsourcing-proof" that aren't paying very well as it is. Personal care aides, for instance, can't be outsourced and are in high demand, yet make an average salary of around $20,000. Teachers are supposed to be "outsourcing-proof" yet in some states the average teacher salary is less than $50,000. Oh, and landscaping? Average salary is $25,000.

The real wage growth has been in skilled labor, period. The surest way to ensure people are paid decent wages is to send them to college. The surest way we sent them to college in the past was to pay workers decent enough wages so that they could send their kids to college. If we're not going to pay workers enough to be able to afford their kids education and we're not going to pay unskilled workers enough to make a comfortable living then we're going to end up with asymmetrical standards of living no matter how "outsourcing-proof" jobs are. Regardless of how much they're paid for on-site labor, they're still competing with educated elites whose high-powered salaries drive up inflation and can be used as leverage against their potential earning power.

i'm not disagreeing with the importance a college education has on lifetime earnings potential nor arguing that an outsourcing proof job is a guarantee for high pay. but all things being equal in terms of pay, if given the option of a job that can be shipped elsewhere on the owner's whim vs. one requiring a local presence, the choice seems obvious.

there is no single catch-all solution obviously though.

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#41 theone86
Member since 2003 • 22626 Posts
@mattbbpl said:

@theone86: Those aren't protected jobs, though. You need a gatekeeper limiting entry into the field

You could say that about any field, though. If you practice a trade you either need on-site training, schooling, or both. Even a lot of modern manufacturing jobs require specialized knowledge, CNC machinists for example. And actually, I think gatekeeping is one of the things holding modern colleges back from achieving more. Too many institutions and professors see themselves as weeding out unworthy candidates rather than honestly trying to educate as many as possible. It's a problem I think can be addressed, though. Studies have actually shown that traditional lectures are inferior to online lectures in terms of learning. If colleges actually shift the role of professors according to this data to more of an academic coach than a professor then their role in gatekeeping will become diminished.

@comp_atkins said:

i'm not disagreeing with the importance a college education has on lifetime earnings potential nor arguing that an outsourcing proof job is a guarantee for high pay. but all things being equal in terms of pay, if given the option of a job that can be shipped elsewhere on the owner's whim vs. one requiring a local presence, the choice seems obvious.

there is no single catch-all solution obviously though.

Look, nothing drives me crazy like when I see coal industry workers who hate coal moguls and vote for free market politicians, yet do anything to protect coal companies because they think it will protect their jobs (even though they seem to kind of hate them). Still, there's a certain sort of sense in their attitude. Their families have worked those jobs, typically for generations, and were able to raise families off the profits. They were raised with the implicit expectation that they'd be able to do the same thing, and now all of the sudden they're not able to and are being thrown into low-paying industries like retail, fast food, and warehousing. It's the same thing for manufacturing. The U.S. manufacturing industry came into its own after the New Deal and World War Two, and multiple generations of workers have raised families off of those wages. Since the seventies, though, a decline in unions and outsourcing has led to reduced wages, and now people are left with a reality that doesn't match expectations. If someone had shown up at their workplaces in the seventies and said that their jobs were going to be gone in forty years so better get their kids to learn a trade maybe it would have been different, but I do think there's a pretty natural urge for children to look up to their parents and take up their profession anyway. Showing up and telling people that they can't make a decent wage if they do so, or that they can't do so at all because those jobs no longer exist is a pretty big psychological shock.

Now I'm not saying that protectionism is the answer, because I do think it does more harm than good, but neither is just accepting outsourcing as a matter of fact. Part of the reason I break with the left in this country is because I defend trade deals, and part of the reason I do that is because they protect unions in foreign countries, at least in theory. The fact that multinational corporations can outsource to begin with is disgusting. What they're doing is taking advantage of poor living conditions to increase their profits at the expense of U.S. workers. If ever you needed proof that the ruling class pits workers against each other, that is it right there. We shouldn't be defending people who take advantage of the fact that workers in developed countries don't know their true worth, we should be trying to find a way to allow everyone to be able to achieve their true worth no matter what country or what profession they're in.

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mattbbpl

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#42 mattbbpl
Member since 2006 • 17664 Posts

@theone86: I'm not arguing in favor of gatekeeping, I'm stating that's the primary difference between most of the different service jobs you two are referring to.

Throw an AMA type of organization in the mix limiting the number of, say, landscapers and watch the wage effects.

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#43  Edited By theone86
Member since 2003 • 22626 Posts

@mattbbpl: That actually seems to be a half-decent argument for gatekeeping. I mean, if jobs that can't be outsourced aren't producing decent wages then limiting supply would drive wages up, albeit at the expense of people who will be drummed out or no longer able to get into those professions. That seems to be the central question in any discussion of wages, though, is to find the right balance of raising wages to increase the earnings of people who will remain employed versus keeping wages low to allow more people to become employed.

I should also note that home health aides don't have low wages because of low demand, it's because many people who require their services can't afford to pay them more. Gatekeeping probably wouldn't have much effect on their wages either way.

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mattbbpl

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#44 mattbbpl
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@theone86: yeah, if you look across the entire economy it's a complex situation in which gatekeeping plays a part ( and significantly more in some areas than others).

Your support of gatekeeping is an option nteresting twist I didn't see coming. Looking across the economy we again see effects of it large and small, from licensed contractors to doctors. After giving those situations some thought, do you have any reservations regarding that support?

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#45 theone86
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@mattbbpl: I don't really support gatekeeping save for unions, and I've always thought gatekeeping was a bug and not a feature of them. It was pretty much after you mentioned it that I was like "huh, maybe landscapers would get paid more with licensing." But, like, the AMA for instance. My problem with supply side has mostly been that it creates a power imbalance where one side can use collective action to their benefit (corporations) and the other can't (unions). If organizations like the AMA can leverage licensing to inflate wages, and thus cost, but other workers can't then it creates the same type of power imbalance. Maybe the way to correct that balance is to drive up costs in other sectors the same way. I'm still against it in principle, but if the AMA proves immune from anti-gatekeeping measures then I'm more open to gatekeeping as a way of maintaining balance. That being said, it really hasn't helped wages in plenty of professions, like hairdressing.

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#46  Edited By mattbbpl
Member since 2006 • 17664 Posts

@theone86: I'm with you, it's complex. The AMA is one of the more extreme examples because it's A) specifically for already high earners and B) has allowed the costs of that group's services to outpace inflation/wage growth by so much for so long that a large number of people simply can't afford their services anymore without assistance in some form (and that's why I chose it).

As for the power imbalance, 100% with you. We don't talk about countervailing forces anymore because supply side mania has made it passe, but we're going to have to soon.

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#47  Edited By mattbbpl
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As for the original topic, last month's ISM figure was released today. Manufacturing output contracted further this month (marking the third consecutive month of contraction).

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#48 mattbbpl
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It fell last month, too.

https://www.cnbc.com/2019/12/02/ism-manufacturing-november-2019.html

The ISM Manufacturing Index registered 48.1 in November, down from 48.3 in October and below market expectations of 49.4.

Anything below 50 represents contraction in a survey that gauges the activities of goods producers.

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#49 Serraph105
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@mattbbpl said:

It fell last month, too.

https://www.cnbc.com/2019/12/02/ism-manufacturing-november-2019.html

The ISM Manufacturing Index registered 48.1 in November, down from 48.3 in October and below market expectations of 49.4.

Anything below 50 represents contraction in a survey that gauges the activities of goods producers.

And people still tell me that Trump has brought so many manufacturing jobs back since he came into office. It seems to be lower now than when he first took office.

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#50 mattbbpl
Member since 2006 • 17664 Posts

@Serraph105: It's all about the feels. It doesn't matter what the truth is, just the truthiness.