The Future Of : Made In The USA

Watch it on CNBC tonight....Meeting of the Minds: Rebuilding America

Premieres Wednesday, December 2nd 8p ET

Manufacturing led the United States to become the richest nation in the world and has been the foundation of the middle class. But times have changed and today's economy values innovation and design over manual labor -- emphasizing mind over matter. This sea of change has spurred many questions: Are the manufacturing jobs in the US gone forever? Does an economy that doesn't produce anything have any real value and has 'Made in the USA' died, taking with it the soul of our country? CNBC’s Maria Bartiromo gathers some of the most influential leaders in manufacturing for a Meeting of the Minds at Carnegie Mellon University to answer those questions and plan for the industry’s future.

The CEO of GE points out an interesting fact: Germany exports are 40% of GDP and it has a more expensive labor force than the USA. The USA now only exports 7% of GDP down from 25% just 10 years ago. The CEO of Nucor points out that it's America's failed trade policies that has been distroying the middle class not the unions.

Here are just a very few moments from the business special. Forgive the commercial. I was unable to remove it from the free videos:

A steelworker asks GE CEO Jeff Immelt where the constant outsourcing of American jobs is likely to lead this country.


Unions are the focus of this comment by Bill Ford of the Ford Motor Company, who fields a difficult question from a student. Mr. Ford forgets to explain to the student VW is a higher cost Union shop than the USA.


GE CEO Jeff Immelt has a number of suggestions for how America can move beyond its current manufacturing crisis and get back on track.


Discussing America's once-great manufacturing base, and Nucor Steel CEO DiMicco's comment to one of the steelworkers in the audience, with CNBC's Maria Bartiromo.


Students, steelworkers and businessmen discuss the US manufacturing crisis. Bill Ford offers special advice to students.

Death Of A City - 1/2 Million Buys Silverdome

A once great domed football stadium built as just one part of the Detroit MI area mid-70's reveal plan just sold for about 1 percent of what it cost to build.

China, India, Kuwait take note. You want a deal on real-estate? Do you want to buy at prices below the usual going-out-of-business 65% off everything? How about prices at 90% off?

The Pontiac Silverdome — once home to the NFL’s Detroit Lions — was just sold for $583,000, or about 1% of the $55.7 million it took to build in 1975.

The Silverdome, an 80,300-seat stadium located in Pontiac, Mich., is the latest example of how comprehensively the recession has socked southeastern Michigan.

Mass layoffs and automotive plant closures have wreaked havoc on the local economy. Budget deficits are deep, foreclosures are widespread, and the population shrinking – from about 2 million people in the 1960s to about 900,000 today.

As a former Michigander and Detroit resident I'm sadden by the death of the area. The once great Silverdome stadium may be a metaphor for the state of business and employment in Detroit MI.

Here are just a few other examples of the death of a city.

When I worked in the Detroit area the K-Mart headquarters was a shiny new showpiece (employing thousands)and business was booming. K-Mart filed bankruptcy in 2002.

Rockwell International(my Detroit employer) was number 27 on the Fortune 100 corporation list. Rockwell International had a workforce of over 100,000, organized into nine major divisions. By 2001 what was left of Rockwell was split into two smaller companies.

Just 10 years ago most believed GM was at the top of its game, a much leaner and more efficient company from the 70's and now their bankrupt.

Michigan unemployment now exceeds 15%, but real unemployment in the whole Detroit metro area is at depression levels (25%). It's just one more example in a long string of examples of the shifting sands of world economic fortunes.

Death of a Great City, an article written in September by Daniel Okrent, a Detroit native, outlines the city's economic plight and compares it to a natural disaster we all recall, hurricane Katrina, which devastated the city of New Orleans.

" Three years after Katrina devastated New Orleans, unemployment in that city hit a peak of 11%. In Detroit, the unemployment rate is 28.9%. That's worth spelling out: twenty-eight point. Unemployment in Pontiac is at 35.0%."

He concludes with:

"...the story of Detroit is not simply one of a great city's collapse. It's also about the erosion of the industries that helped build the country we know today. The ultimate fate of Detroit will reveal much about the character of America in the 21st century. If what was once the most prosperous manufacturing city in the nation has been brought to its knees, what does that say about our recent past? And if it can't find a way to get up, what does that say about our future?"

USA Unemployment Hits 26 Year High

The American unemployment rate surged to 10.2 percent in October, its highest level in 26 years, as the economy lost another 190,000 jobs, the Labor Department reported Friday.

The nation’s jobless swelled to 15.7 million. Since late 2007, payroll employment has fallen by about 7.3 million. Only 1.8 million jobs were lost in the 2001 recession. So, this is 3 times worse. More than a third of the nation’s unemployed — 35.6% — have been out of work long-term, defined by the Labor Department as a period of 27 weeks or more — that's the highest proportion since World War II.

The jump into the realm of double-digit joblessness— provided a sobering reminder that, despite the apparent "technical" end of the Great Recession, economic expansion has yet to translate into jobs, leaving tens of millions of people still struggling. And many with a job are wondering if their next.

The labor situation is actually worse than what these figures and the 10.2% rate show. The government doesn't count as officially unemployed the so-called discouraged workers who have given up looking for jobs -- which in October numbered 808,000, up from 484,000 a year earlier.

There also were 9.3 million people who reported they had little choice but to work part time because their hours had been cut or they could not find full-time jobs. If this group and discouraged workers are included, along with others on the fringe of the labor market, the nation's unemployment and underemployment rate in October was 17.5%.

The last time the jobless rate crossed double digits was during the recession and initial recovery period of the early 1980s. Then, unemployment hit 10.1% in September 1982 and stayed at or above that level, rising to a high of 10.8%, until June the following year. This time around, unemployment has risen even faster and, by many analysts' and economists' predictions, could hold above 9% through 2010.

While it seems counter intuitive the stock market in 1982 was similar to 2009, as it also rose over 60% -even as unemployment was rising. Now let's hope the 2010 stock market is more like 2004 then 2002 market. Even, some market bulls find it hard to believe (with this recession dwarfing 2001) that we are at levels above DJIA 10,000.

Unemployment Ominous Jobless Recovery

In my prior post I reported on the speck of light we saw in the Septembers unemployment report. We said the positive sign was the fact that new unemployment claims as a percentage of the labor force had declined. This was a positive sign relative to the recessions we had in the 70's and 80's.

Now for the really bad news. As a result of are outsourced and imported economy, beginning in 1991 American began experiencing what economist call "jobless" recovers. In other words unlike the 70's and 80's were we saw big spikes in job hiring at the end of recessions, we no longer see large job creation improvements.

Why? Because unlike the 70's and 80's we now purchase much (maybe most) of what we buy from foreign lands. In fact the economic training I and every economist gets totally ignores the negative impacts of importing more than you export. Instead economist will dwell all day on elementary examples of the benefits of "Comparative Advantage" which like their theory of "The Rational Man" has value but are far to simplistic to exist in a complex world of humans and changing economic tides. And so it is you will be hearing more of this cherry coated term, "jobless" recovery in the future.

Yes, economist called attention to this in the 1990-91 recession when unemployment continued to rise after the "official" recession end. The chart above shows the monthly U.S. jobless rate back to January 1990 (BLS data here), highlighting (in grey) the 1990-1991 and 2001 recessions, and the two periods following the last two recessions that were referred to as the periods of "jobless recovery." Following the 1990-1991 recession, the unemployment continued to increase for 15 months until it peaked in June 1992 at 7.8%, and following the 2001 recession, the jobless rate increased for 19 months until June 2003 when it peaked at 6.3%.

Assuming that the most recent recession ended in June 2009 (as many economist believe) and we have another jobless recovery of at least 16 months, we can expect the unemployment to realistically continue to increase at least through the end of 2010 before it reaches its post-recession peak in the current "jobless recovery."

How can this impact the stock market? Well, the most recent example was the 2001-2003 market which climbed for months after the 9/11 final sell-off which proved to be the end of a much shorter recession. But by March of 2002, after a period of inventory restocking similar to our current experience the market fell for 9 straight months back to its 2001 lows before rebounding again in 2003 when unemployment finally began declining.

Let's just hope history doesn't repeat itself.

New Unemployment Claims Show Hope

You can forget using cold heartless statistics to define the difference between a recession and depression for a family. Former President Harry S. Truman defined it best without using one number. He said, "It's a recession when your neighbor loses his job; it's a depression when you lose yours."

Yes, unemployment is now standing at 9.8% and that's bad. I'm not here to paint you a rosy economic picture. But one must always keep in mind night is followed by day. Actual unemployment is considered a lagging indicator while changes in weekly unemployment claims is considered a leading indicator of what's to come. And there we are seeing signs of light on the horizon. Signs that daylight is coming.

This chart shows weekly claims as a % of the total workforce. That percentage dipped with last week's report to its lowest level for the year. Comparing the severity of this recession to others based on this metric, we are in better shape now than in the recessions of '74-'75 and '81-'82. The economy is now about 3 months into a recovery with a workforce disruption metric that has fallen to 0.42%. It took almost one year of recovery for that same metric to drop to this level following the '81-'82recession, and almost 18 months of recovery following the '74-'75 recession.

Now, I find this little speck of light positive for another reason. Back in the 70's and 80's it was easier to have a more powerful job creation uptick when the economy was improving due to the lack of outsourcing jobs to foreign countries back then. It would also be interesting to know how high the underemployment rate reached back then compare to now.

If anyone has any additional interesting facts to add about last weeks unemployment report, please let us know. Here is the official American September Unemployment Report for all to see.