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Buddy R Pacifico said...

What is the Manufacturing sector of the U.S. economy?

"The Manufacturing sector comprises establishments engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products."(BLS)

Manufacturing can range from transforming bauxite into aluminum to meat patties and buns into hamburgers. Most manufacturing is assembling components (inputs) into finished goods. Obvilously this is a vast universe.

What happens when the vast universe shrinks because the transformation is taken out of the economy? Everything associated with the transformation shrinks including a huge services component. This is productivty leaving.

Yes, I worry because manufacturing is transforming other economies, at the expense of the U.S.

Yes, I worry that U.S. tax and regulatory policies are transforming the formerly productive, into entitlement oblivion.

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Benjamin said...

Still, the success of China, booming ahead on a platform of exported manufactured goods, suggests that manufacturing can increase a nation's prosperity.

Also, it is true the manufacturing jobs pay more than service jobs, on average.

C+I+G+(X=M) suggests that trade balances, or even surpluses, rather than deficits, is desirable.

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PeakTrader said...

Buddy says "I worry because manufacturing is transforming other economies, at the expense of the U.S."

Are you suggesting the government should've stopped jobs in older industries from moving offshore?

If the U.S. textile industry was still booming, do you believe resources would've been shifted into new industries faster?

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PeakTrader said...

Sean, retail and food service jobs represent a higher level of consumption or higher U.S. living standards.

U.S. household net wealth is about $60 trillion and 20% of U.S. households earn over $100,000 a year. Many Americans work in Information Age, Biotech Revolution, or in other skilled jobs.

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Buddy R Pacifico said...

Peak Trader writes:

"If the U.S. textile industry was still booming, do you believe resources would've been shifted into new industries faster?"

Is a vibrant economy a zero-sum economy? If one industry is booming then a new industry can't rise and boom also? If oil and gas drilling equipment is a booming industry then telecommunications won't boom because a shift needs to happen?

No, no, and no.

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PeakTrader said...

Buddy, resources are limited. How will resources shift into new industries when they're employed in older industries?

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Buddy R Pacifico said...

Peak Trader states:

"Buddy, resources are limited. How will resources shift into new industries when they're employed in older industries?"

It is not zero-sum. Capital markets allocate to the new and growing as well as the cash generating. Berkshire Hathaway may have given up its looms but it still owns shoe, candy and underwear makers. The wealth received by Berkshire Hathaway stockholders, in the form of capital gains, can be used to invest in Apple or First Solar.

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PeakTrader said...

Buddy, you're talking about efficiency rather than scarcity.

Offshoring jobs for higher profits and lower prices to free-up limited resources for emerging industries is a form of efficiency.

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PeakTrader said...

"The Information Age started in 1971."

Perhaps, around 1982 is more accurate.

"In 1982 "The Computer" was named Machine of the Year by Time Magazine."

Also, the 80 million Baby-Boomers (born between 1946-64) began entering "prime-age" (35-54) in 1981.

Moreover, globalization began to accelerate around 1982 (turning the U.S. from a net creditor to a net debtor nation).

Furthermore, of course, there was the "Reagan Revolution" (and the first conservative president since Hoover).

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http://www.blogger.com/comment.g?blogID=28997633&postID=696107787185997734

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PeakTrader said...

The U.S. is a most dynamic economy:

Example:

COLORADO BUSINESS EMPLOYMENT DYNAMICS DATA
Colorado data for the quarter ending March 2007.

In that quarter, 146,688 private jobs were created (7.6 percent of total private employment)...131,774 jobs were destroyed (6.8 percent of total private employment)—14,914 net rise (0.8 percent).

Roughly speaking, this means between January and March 2007 one private sector job was created for each 13 existing jobs while a job was lost for every 14 existing jobs.

Jobs added from existing expanding establishments 115,669 (6.0%).

Jobs added from newly opened establishments 31,019 (1.6%).

Jobs lost from existing contracting establishments 106,576 (5.5%).

Jobs lost from closed establishments 25,198 (1.3%).