The U.S. Economy’s Secret Weapon
AHEAD OF THE TAPE
The U.S. Economy’s Secret Weapon
Improving manufacturing activity could help the sputtering economy more than many expect
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A ladder factory in Kentucky. The moribund U.S. manufacturing sector showed some signs of life in March. PHOTO: LUKE SHARRETT/BLOOMBERG
By STEVEN RUSSOLILLO
May 1, 2016 3:15 p.m. ET
6 COMMENTS
In this lackluster economy, an unlikely catalyst could provide a much-needed boost.
The moribund U.S. manufacturing sector has struggled with low oil prices, the strong dollar and a soft global economy. But it finally showed signs of life in March. Further evidence that manufacturing is regaining its footing is expected in a report due Monday. And improving activity could help the sputtering economy far more than many expect.
Economists polled by The Wall Street Journal estimate that the Institute for Supply Management’s manufacturing index hit 51.2 in April. That would be the second consecutive month above 50, implying customers’ orders and factory production are expanding. It was in contraction, or below 50, from late summer of last year through March.
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THE WALL STREET JOURNAL
Yes, manufacturing doesn’t pack as much punch to the U.S. economy as it once did. Less than 10% of U.S. employment is in the manufacturing sector, down from about 25% in the 1970s and nearly 40% in the 1940s. Yet those figures also don’t account for people like truck drivers. They aren’t necessarily employed in manufacturing, but still depend on it for their livelihood.
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To get a sense of how much that matters, consider last week’s report on U.S. gross domestic product. The economy expanded by only 0.5% in the first quarter, hurt by tumultuous financial markets and weak global demand.
Contributing to the pain, fixed nonresidential investment, a measure of business spending, fell 5.9%, its biggest drop since 2009. This metric, which included sharp declines in spending on equipment and structures, subtracted 0.76 percentage point from GDP’s overall growth rate. A pickup in manufacturing activity would help ease the pain in the current quarter.
With oil prices bouncing off a low hit in February and the dollar’s strength waning in recent months, manufacturers have gotten a bit of a reprieve. Should this continue, the U.S. economy’s tough start to 2016 might again be nothing more than a blip.
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At the beginning of 2014, the economy contracted. In early 2015, it barely expanded. But in both instances, GDP recovered and ultimately advanced by 2.4% each year.
The economy has dug itself another hole—one that it should again be able to manufacture itself out of.
Write to Steven Russolillo at steven.russolillo@wsj.com
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Income is overly concentrated and outsourcing, and now insourcing, with the TPP, and the expansion of the H work visas, along with automation, most employment is in low paying jobs.
STEM jobs are being insourced by companies like Disney that are forcing their employees to train their foreign H visa holder replacements.
Only 26% of S..T.E.M graduates are working in their field of study.
The American economy is about as anti american as it can get.
Corporations are borrowing to repurchase stock instead of investing in their companies and people.
Corporate debt defaults in coal, oil and natural gas, are rapidly increasing with the crash in commodities.
There are several large US corporations that have thousands of layoffs announced in the coming months.
There are several states that are currently already in full blown recessions due to the commodities crash and the war on coal.
Rents are so high that people cannot save up enough for a down payment and the majority of new construction has been rental properties or for the high end of the market.
There are more generations of families living under the same roof in this country than ever and it's not because they really love