Most economists are predicting a rosy forecast of more than 3 percent expansion for the U.S. economy in 2015, up from 2.3% in 2014. If it does, this "would mark the first time in a decade that growth has reached that level for a full calendar year." The unemployment rate is also predicted to drop from the current 5.6% to 5.3%. The questions are: How much will American manufacturing benefit from this expansion and how many manufacturing jobs will be created?
While the country gained 252,000 jobs in December, only 17,000 were manufacturing jobs according to the monthly report from the Bureau of Labor Statistics, which added ─ "…Manufacturing added an average of 16,000 jobs per month in 2014, compared with an average gain of 7,000 jobs per month in 2013."
This was a significant increase over the previous year, but notice that President Obama recently stated that "more than 764,000 manufacturing jobs have been gained since the end of the recession." This means that we still have a long way to go to recoup the 5.8 million manufacturing jobs that we lost between the years 2000 – 2009. According to Scott Paul, president of the Alliance for American Manufacturing, "…December's manufacturing job gains were behind the previous month, and that halfway through the president's second term, the country is just over one-quarter of the way to his pledge to create 1 million new manufacturing jobs in that four-year span."
While the U3 unemployment rate dropped to 5.6%, the U6 rate is double at 11.2%. The U-6 rate includes "Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force."
In a recent article, business reporter Jonathan Horn of the San Diego Union-Tribune noted, "the unemployment rate fell in part because people dropped out of the labor force ─ they either retired or left the labor force. Last month, the number of unemployed persons fell 383,000 to 8.7 million. However, less than one-third of people out of work found jobs; the rest stopped looking. The percentage of Americans who are either working or looking for work fell back to a 37-year low last touched in September."
The January 6-11, 2015 edition of the San Diego Business Journal reported that manufacturing jobs in San Diego increased by 3.3% from November 2013 through November 2014, for a total of 97,400 industry jobs, up by 3,100 jobs. However, we still have a long way to go to get back to the 122,600 manufacturing jobs in the San Diego region we had at the end of 1999.
Two manufacturing sectors led the job growth in San Diego: shipbuilding and unmanned aerial vehicles (drones.) General Dynamics' Nassco division has contracts for five commercial tankers and one Navy ship and plans to "add about 300 additional jobs to the shipbuilder’s staff, bringing the total workforce to about 3,500." General Atomics Aeronautical Systems Inc's "local employment grew 9% year over year to 4,843 as of June 2014."
In this same article, I was quoted as saying, "For those with skills and experience in a particular industry, things were definitely trending up in 2014…This (2014) has been a year when people could find jobs.” I'm also quoted as saying, "San Diego greatly diversified its economy following the previous major recession in the early 1990s, and that’s made a huge difference in the past several years…One of our strengths is that we’re not hurt as much from the lack of new defense programs.”
Manufacturing Policy Actions in 2014
The R&D tax credit that had expired December 31, 2013 was extended for 2014, but has now expired again as of December 31, 2014. The R&D Tax Credit was originally introduced in the Economic Recovery Tax Act of 1981 sponsored by Rep. Jack Kemp and Sen. William Roth. The credit has expired eight times and has been extended 15 times. The frequent expiration of this tax credit creates unnecessary uncertainty for business investment planning. The R&D Credit Coalition, National Association of Manufacturers and many other business groups recommend that this tax credit be made permanent.
One bright spot on the national scene is that a bill requiring a National Strategic Plan for Manufacturing authored by Rep. Daniel Lipinski, D-Ill., and Rep. Adam Kinzinger, R-Ill., became law right before Christmas. Three of Lipinski's previously authored bills had passed the House three times over the past five years, but failed to either pass or be considered in the Senate. This bill was included in legislation that passed both houses and was signed into law by the president. U.S. Senators Mark Kirk, R-Ill., and Chris Coons, D-Del., and Mark Pryor, D-Ark., introduced the language in the Commerce, Science and Justice appropriations bill passed by the Senate.
Rep. Lipinski stated, "After many years of hard work, my bipartisan legislation to boost domestic manufacturing and American jobs by. The bill requires that at least every four years the president works with public and private stakeholders to produce and publish a plan to promote American manufacturing. In addition, every year the president’s budget blueprint will have to contain an explanation of how it promotes the most recent manufacturing strategy. This bill guarantees that Washington has to pay attention to what can be done to help manufacturers and workers. Getting this provision into law can really make a difference by leading to economic growth, increased American security and more middle class jobs that pay hard-working Americans a good wage. I look forward to finding many more ‘Made in USA’ labels on products we see in our stores and online."
In June 2013, I wrote an article criticizing an earlier version of this bill, H.R. 2447, the American Manufacturing Competitiveness Act of 2013, and was contacted by Rep. Lipinski's chief of staff to discuss my criticisms. I am anxious to see whether or not the current language included in the Commerce, Science and Justice appropriations bill addressed these criticisms.
In his 2014 State of the Union address, President Obama pledged to launch four new manufacturing institutes this year, for a total of eight institutes launched so far on an original goal of creating 15 manufacturing innovation institutes. On December 11th, President Obama announced that the federal government will invest more than $290 million in public-private investment for two new manufacturing innovation hub competitions.
One will be in smart manufacturing at the Department of Energy and one in flexible hybrid electronics at the Department of Defense. Each institute will receive $70 million or more of federal investment to be matched by at least $70 million from the private sector for a total of more than $290 million in new investment.
"The Department of Defense will lead a competition for a new public-private manufacturing innovation institute in flexible hybrid electronics…The Department of Energy will lead a competition for a new public-private manufacturing innovation institute focused on smart manufacturing, including advanced sensors, control, platforms, and models for manufacturing…" Interested applicants can find more information on the competitions at www.manufacturing.gov.
While funding manufacturing institutes may have a long-term benefit similar to funding research at other government institutions, there are actions that President Obama and Congress could take that would have a more immediate benefit on the manufacturing industry and create more jobs, such as making the R&D tax credit permanent, addressing currency manipulation by our foreign trading partners, easing taxes to repatriate corporate profits, and actually doing comprehensive tax reform. Let us hope that the economic predictions of a better 2015 than 2014 will come true and that more manufacturing jobs will be created by even more companies returning manufacturing to America.