August 15, 2003

Good Industrial Production News for July

A surprisingly large jump in industrial production in July--especially considering that manufacturing employment fell by half a percent, by 71,000 in July: from 14.68 to 14.61 million:

FT.com Home US: US industrial production rose at its fastest pace since January last month, adding to the evidence that economic growth is accelerating. Output rose by a robust 0.5 per cent over the month, its third consecutive gain and well ahead of expectations of a 0.2 per cent rise. The figure was boosted by a steep rise in utility output - which economists said reflected the greater use of air conditioning - and strong car sales, which have been helped by a new round of incentives. But the rise in output was relatively broad-based, with a particularly strong 4.2 per cent rise in home electronics...

"This will increase confidence that we have a recovery on our hands," said Mark Cliffe, chief economist at ING. "There is now a fighting chance of getting growth of above 4 per cent by the end of the year."

It's only one month, and manufacturing is not the same thing as industrial production, but it's interesting to see industrial production rising at a 6% per year rate at the same time that manufacturing employment is falling at a 6% per year rate.

Nobody will be surprised to learn that I see this as another piece of the very good news about the strong underlying productivity trend.

Posted by DeLong at August 15, 2003 09:26 PM | TrackBack

Comments

I have a more sceptical view about the underlying trend, argued here and, in more general terms here. An obvious question is, if manufacturing productivity growth over the past few years has been so strong, why have imports grown at the expense of domestic production?

Posted by: John on August 15, 2003 10:04 PM

I have a more sceptical view about the underlying trend, argued here and, in more general terms here. An obvious question is, if manufacturing productivity growth over the past few years has been so strong, why have imports grown at the expense of domestic production?

Posted by: John on August 15, 2003 10:06 PM

Suppose you can invest in an auto parts factory in India, and be assured of an educated easily skilled work force that commands far less pay and benefits than an American work force. Well, India is quickly becoming a major force in auto parts production whether for Toyota or Ford. Productivity in India can be high as is productivity in America. We are competing globally and China and India are becoming terrific competitors.

Posted by: anne on August 16, 2003 07:20 AM

Brad DeLong points out that the deficit of the 1980's appears to have constrained productivity growth. Low saving, low investment, low productivity growth. Well then, we will soon be at ZERO national private and public saving. Will the deficit tell on productivity? Of course, there may be no lack of investment funds because of foreign capital flows to America in funding the deficit. Then, foreign investors will be gaining greater relative ownership of productive American assets making Americans increasingly investment poor.

We have gotten ourselves is a fierce fiscal bind, and I do not see a simple solution. Imagine the cost of really building Iraq, in addition to the $5 billion a month now for Iraq and Afghanistan.

Posted by: anne on August 16, 2003 09:39 AM

"It's interesting to see industrial production rising at a 6% per year rate at the same time that manufacturing employment is falling at a 6% per year rate."

Productivity growth is there, no question. What to do about the loss of fine jobs in manufacturing? Well, again, why not focus on building infra-structure? Japan has been laughed at for unduly focusing on infra-structure during the slow growth period. By doing so, Japan has sustained employment. We need infra-structure development and imagine what a new New Deal could accomplish.

Now, I know about the tax cuts and I know about the radical right disdain of public services. But, why not a new New Deal? Why not a decent power transmission grid? Decent urban public schools. On and on. Japan did spend on many fine projects the last decade.

Anne F&B just now

Posted by: anne on August 16, 2003 10:08 AM

Anne F&B

Who needs electricity for New York. Let 'em rough it.

JD F&B

Posted by: jd on August 16, 2003 10:39 AM

“Now, I know about the tax cuts and I know about the radical right disdain of public services. But, why not a new New Deal? Why not a decent power transmission grid? Decent urban public schools. On and on. Japan did spend on many fine projects the last decade.”

Where do I even begin? What in heaven’s name is supposedly “radical right” about privatizing social services as much as possible? Some folks might consider this to be simple common sense. Have you ever heard of the principle of subsidiarity? A New Deal would be so incredibly wasteful. Government should always be the last resort, and not the first. Private sector business entities almost always have more of an incentive to provide goods and services. Government bureaucrats are virtually impossible to fire for incompetence and laziness.

Did you say that you desire a “decent power grid?” In that case, you should move to Texas! We marginalize our environmental lunatics and therefore do not endure the difficulties of a New York or a California. There can also no such thing as “decent urban schools’ when black children have been sufficiently radicalized to consider the valuing of educational values as antithetical to authentic blackness. Even the children of affluent blacks now fear to be labeled as “acting white.” Finally, do you really wish for us to copy the Japanese? Don’t we have enough problems?

Posted by: David Thomson on August 18, 2003 06:57 PM

“Who needs electricity for New York. Let 'em rough it.”

i’m not sure whether you are speaking tongue in cheek. Nevertheless, I adamantly believe that both New York and California deserve their energy troubles. Their citizens have only themselves to blame. After all, who forced them to vote into office a bunch of Democrat and Liberal Republican politicians? Are Texans like myself responsible for the outrageous political bribe money Gray Davis gave to the prison guards? Gosh, I don’t think so.

Posted by: David Thomson on August 18, 2003 07:03 PM
Post a comment