America's Manufacturing Renaissance

From my article "Manufacturing in Our Favor" for the U.S. Chamber of Commerce:

Intro: There were three related and important manufacturing trends that emerged in 2011:
 

a)  American manufacturing remained at the forefront of the United States’ economic expansion for the second year in a row and re-established itself as one of the economy’s strongest sectors;

b)  An erosion of China’s manufacturing cost advantages, especially for wages, started to bring manufacturing production back to the United States from China and other low-wage countries, reversing a decade-long trend of outsourcing production overseas; and,

c)  An abundance of domestic shale-based natural gas brought gas prices to record low levels and sparked a new boom in the United States for energy-intensive manufacturing. 

As a result of these trends, American manufacturing in 2011 had its best year in at least a generation by all relevant measures of economic performance: profits, output growth, and employment gains. In fact, it’s possible that we will look back on 2011 as a watershed year that marked the beginning of a great manufacturing renaissance in America.

Conclusion:

Putting it all together, the U.S. manufacturing sector had one of its best years ever in 2011, reflecting a new manufacturing rebound that is now underway and is expected to accelerate in the years ahead. Flush with record-level profits, the manufacturing sector has never been financially healthier than it is today, and the future of American manufacturing has never looked brighter. After years of negative reports about the decline of American manufacturing, it’s now time to recognize and celebrate a great turning point, as America’s industrial sector moves in a new direction that many are now calling a “manufacturing renaissance.” 

Maybe This Helps Explain Why Europe is in Trouble: Workers Now Get a Paid "Vacation Do-Over" if Sick

BRUSSELS — "For most Europeans, almost nothing is more prized than their four to six weeks of guaranteed annual vacation leave. But it was not clear just how sacrosanct that time off was until Thursday, when Europe’s highest court ruled that workers who happened to get sick on vacation were legally entitled to take another [paid] vacation. 

“The purpose of entitlement to paid annual leave is to enable the worker to rest and enjoy a period of relaxation and leisure,” the Court of Justice of the European Union, based in Luxembourg, ruled in a case involving department store workers in Spain. “The purpose of entitlement to sick leave is different, since it enables a worker to recover from an illness that has caused him to be unfit for work.” 

With much of Europe mired in recession, governments struggling to reduce budget deficits and officials trying to combat high unemployment, the ruling is a reminder of just how hard it is to shake up long-established and legally protected labor practices that make it hard to put more people to work and revive sinking economies.

The ruling applies across the European Union of 27 countries, but does not apply to the 25 percent of the Spanish labor force that is currently unemployed."

HT: Bill Greenway

BPP@MIT Annual Inflation Rate Falls Below 1.5%

The Billion Prices Project @ MIT just released daily online price index data through May 31, and the annual inflation rates from that price index are displayed in the chart above going back to late 2009 (red line). According to this real-time information of major inflation trends in the U.S., inflationary pressures have been subsiding for the last year, and the current annualized inflation rate of about 1.5% through May is the lowest rate since late 2009. In contrast to the MIT-BPP inflation, annual inflation based on the CPI is running higher, at about 2.25% through May.  

The breakeven rate on regular 10-year Treasury notes versus 10-year indexed-Treasuries, a market-based measure of expected future inflation, has been trending downward from a recent peak of 2.43% in April, and is currently at 2.07%, indicating that the bond market expects future inflation to continue to remain low.  The one-year breakeven rate just turned negative, so that might indicate some expectation of mild deflation over the next year. 

Bottom Line: There doesn't seem to be any evidence that inflationary pressures are developing in the U.S. economy, and there doesn't seem to be any indication that inflation will be a problem going forward through the rest of the year.  If anything, we might see some mild deflation.  

Update: Note in the chart below that when both the BPP@MIT are scaled to equal 100 in July of 2008, they both are equal 105 at the end of May 2012, both having risen exactly 5% over the last four years (almost).  Therefore, the BPP@MIT index tracks the CPI over long periods of time, despite the fact they are tracking different baskets of goods with different weights.  In that case, it would be hard to make the case that the BPP@MIT index "inherently deflationary" (see comments).   

Reshoring Update

Bloomberg -- "As costs in China rise and owners consider the challenges of using factories 12,000 miles and 12 time zones away, many small U.S. companies have decided manufacturing overseas isn’t worth the trouble. American production is “increasingly competitive,” says Harry Moser, founder of the Reshoring Initiative, a group of companies and trade associations trying to bring factory jobs back to the U.S. “In the last two years there’s been a dramatic increase” in the amount of work returning."

The Video That Led to UVa President's Departure

The video above features a talk ("Higher Education 2.0") by former Stanford professor Sebastian Thrun, co-founder of the new, low-cost (mostly free) online university Udacity, and originally appeared on CD in January.  It was this video that was partly responsible for the downfall of President Theresa Sullivan at U-Va, because it seems that the U-Va. Board of Visitors wanted the university to move more rapidly in the direction of innovative, open-course, online education (with Udactiy cited as one model), and weren't getting enough support from the president. 

From today's Chronicle of Higher Education (subscription required):

"In the weeks leading up to the resignation of Teresa A. Sullivan, president of the University of Virginia, the leaders of the board that forced her out of office traded a number of e-mails with attached articles about the forces transforming higher education, telling one another that the articles illustrated "why we can't afford to wait."

In many of the e-mails, which were obtained by The Cavalier Daily [through a FOIA request], the rector and vice rector of the Board of Visitors—Helen E. Dragas and Mark J. Kington, respectively—commented on articles about online education and the open-course ventures in which top research universities like Harvard, Stanford, and others, are engaged.

The exchanges included one about Udacity, the free education platform that grew out of a Stanford University professor's course. In an e-mail on June 3, Jeffrey C. Walker, a member of the Board of Trustees for the foundation of the university's McIntire School of Commerce, urged Ms. Dragas and Mr. Kington to check out a video of a talk by Sebastian Thrun, the Stanford computer-science professor who founded Udacity.

Mr. Walker said the Berklee College of Music was going to have its board, of which Mr. Walker is a member, watch the video 'as a signal that the on-line learning world has now reached the top of the line universities and they need to have strategies or will be left behind.'

In the e-mails, Ms. Dragas, Mr. Kington, and others appeared to believe that Ms. Sullivan was not doing enough to embrace change, or to press for it quickly enough at the University of Virginia.

On June 10, Mr. Kington sent Ms. Dragas an e-mail in which he forwarded a statement that Robert F. Bruner, dean of the Darden School of Business, made about Ms. Sullivan's departure. In Mr. Bruner's statement, which he sent to faculty, alumni, and other supporters of Darden, Mr. Bruner said that the "philosophical difference of opinion" between Ms. Sullivan and the board, cited as the reason for the president's resignation, had to do with 'the rate of change and progress in the face of long range challenges to the University.'"

MP: Professor Thrun is co-teaching the free, 7-week Udacity course "Introduction to Statistics," which starts next Monday.  

Democratic Congressman Jarel Polis Schools DEA Agent Over Marijuana During Congressional Hearing

DEA official can't answer the questions: Are crack cocaine, heroin, and meth worse than marijuana? 

 

From Andrew Kirwell in Mediaite.com: "Congressman Jared Polis (D-CO) made drug reformers proud on Wednesday when he went after Drug Enforcement Administration official Michele Leonhart during a hearing on DEA oversight. Polis refused to allow Leonhart to get away with half-answering questions about the relative health impact of marijuana versus other drugs. 

Rep. Polis is an outspoken advocate of marijuana legalization (last year, he proposed a deficit-reduction plan that involved legalizing and taxing weed). During the hearing, he sought to make Leonhart concede that other Schedule I narcotics are much worse than marijuana — a point drug reformers often use to make the case that pot shouldn’t be classified with drugs like heroin and meth."

Update: From U.S. News and World Report, "Chart: What the DEA Refuses to Admit About Drugs," featuring my chart below:

U.K. Study: The Most Harmful Drug of All? Alcohol

From the Examiner on November 1, 2010 (originally posted on CD in 2010) : 

"Alcohol is more dangerous than illegal drugs like heroin and crack cocaine, according to a new study. British experts evaluated substances including alcohol, cocaine, heroin, ecstasy and marijuana, ranking them based on how destructive they are to the individual who takes them and to society as a whole.

Researchers analyzed how addictive a drug is and how it harms the human body, in addition to other criteria like environmental damage caused by the drug, its role in breaking up families and its economic costs, such as health care, social services, and prison.

Heroin, crack cocaine and methamphetamine, or crystal meth, were the most lethal to individuals. When considering their wider social effects, alcohol, heroin and crack cocaine were the deadliest. But overall, alcohol outranked all other substances, followed by heroin and crack cocaine. Marijuana, ecstasy and LSD scored far lower (see chart above)."

Here's a link to the full text of the article "Drug harms in the UK: a multicriteria decision analysis," and a summary of the key findings:

"Multicriteria decision analysis (MCDA) modeling showed that heroin, crack cocaine, and methamphetamine were the most harmful drugs to individuals (part scores 34, 37, and 32, respectively), whereas alcohol, heroin, and crack cocaine were the most harmful to others (46, 21, and 17, respectively). Overall, alcohol was the most harmful drug (overall harm score 72), with heroin (55) and crack cocaine (54) in second and third places (see chart above)."

Note: The first 21 comments below appeared following the original post in November 2010.