Monday, May 2, 2011

A Few of Our Favorite Things

I’m not talking about American Idol or Glee (or Ryan Seacrest).  Think bigger.  (No, not Oprah.)  Things we simply cannot do without.   The lifelines I refer to are our phones and computers.  Many of us do not leave home without them.  How could we keep up with life if we cannot keep up with the Kardashians?  What life lessons can Snooki teach us?  How could we be valuable and productive members of society if we were not able to process 1,000,000 new YouTube videos per minute (or process this blog)?

What we don’t typically think about is where these items (and other “manufactured goods”) come from, or maybe we assume everything is “made in China.”  Unless you live in a cave with no clothes (or processed food, that would be a shame) your sharp observation skills have probably alerted you to the fact that the stuff we buy comes from all over the world.  Just look at pretty much any clothing tag, or the popularity of your neighborhood IKEA.  You may even believe U.S. manufacturing is dying since 1/3 of all manufacturing jobs have disappeared over the last 10 years.  

Then you’ll be surprised to hear the U.S. manufacturing sector is alive and doing rather well – especially in computers and electronics products (types of “durable goods” that include our prized iPads and Smartphones).   A measure for understanding the health of the manufacturing sector released today (called the “ISM Purchase Manager Index”) shows the manufacturing sector continued to grow in April for the 21st consecutive month.   This measure incorporates information on employment, production, new orders, supplier deliveries, and inventories as surveyed by 300 U.S. manufacturers.  

Now you might be thinking this blogger has no clue what is going on because you just took out your phone and saw that it was not “made” in the U.S.  But what we don’t see is where all of the components that go into our essential gadgets come from.  Just because our phone was finished in another country doesn’t mean the value of the phone (the technology) was generated and manufactured in that country.  The iPhone is a good example (your “Hello Kitty” wallet is a bad example).   U.S. manufacturing is doing well because of its ability to focus on making what its good at (“comparative advantage”) and because it finds new ways to produce more with the same or less resources.  Research shows that China was the world’s largest goods manufacturer in 2010, and the U.S. followed close behind (19.8% of the world’s share vs. 19.4%).    Yet China employs 100 million workers compared to our 11.5 million – meaning the U.S. manufacturing sector is able to generate 8 times as value per worker than China.  

And it turns out the industry that allows us to know what Kim, Kourtney, and Khloe (and Lamar) did today (computer and electronic products) added value to our economy at an increasing rate despite the recession.   This bodes well for us excited about the next iPad or iPhone version 10.0.  At this rate, we will be able to read what Kim did, view the new Britney video, and play “Angry Birds” simultaneously.  It only gets better!  

(Commerce Dept. (BEA), Bureau of Labor Statistics, Institute for Supply Management, International Centre for Trade & Sustainable Development)

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