I have young kids. And they still sometimes forget that, when you scoop French onion dip out of the bowl with a chip and take a bite, you should not scoop again with the same chip. That's double-dipping. It's unsanitary and can spread maladies.
As the U.S. economy continues to rebound from one of its worst dips in decades, almost every company I speak with is enjoying the economic benefits of customers finally spending all that pent-up money that was burning a hole in their collective balance sheet.
But those same companies that are ramping up production to keep up with orders all worry about the potential of the double dip. Not the chips-and-dip kind. They’re worried about a second drop in the U.S. economy that would once again reverse all of the gains they’ve realized over the past few months.
Is there reason to worry, or are we just being cautious? Of course, the housing market still hasn’t corrected itself, and we’ll most certainly see many of those new unsold housing developments razed just to remove them from the market. I’m sure, like everyone else, you’re involved in an office pool to guess just how high gas prices will climb this summer (I had a premonition dream, and my money’s on $5.15. Of course, the last time I had a premonition dream, Santonio Holmes caught a late-fourth-quarter pass in the back of the end zone, and I wasn’t forbidden by my wife to go to the "butcher shop" for quite a while). At any rate, these things will undoubtedly have an impact on the manufacturing sector, but it’s Memorial Day weekend, our annual welcome party for the summer barbecue season. Can we at least start it off with some good news?
While unemployment still is at 9%, that’s 0.8% lower than it was in November, and nonfarming jobs rose by almost a quarter million in April. Most job gains came in manufacturing, mining and service industries. The manufacturing sector added more than 140,000 jobs this year.
Also, according to the U.S. Department of Labor’s Bureau of Labor Statistics, manufacturing sector labor productivity increased by more than 6% in Q1. Labor productivity also is known as output/hr. It’s calculated by dividing real-output index by an index of hours worked of all persons.
Productivity in manufacturing increased because output grew by 9.7% and hours worked grew by 3.3%. Manufacturing productivity has grown 4.7% over the past year, as unit labor costs dropped 1.4% over the past year.
The durable goods sector saw a productivity increase of 9.8% in the first quarter, while the nondurable goods sector rose 4.5%.
According to the Boston Consulting Group, more offshored manufacturing jobs will return to the United States, as the wage gap with the Chinese job market decreases and some U.S. states offer more affordable locations. Wages in China are up about 17% annually, and the value of Chinese currency is increasing, as well. And Mississippi, Alabama, and South Carolina can offer incentives to attract jobs.
Finally, the demand for industrial control equipment has continued to increase. In six of the past seven quarters, the Primary Industrial Controls Index has risen, according to the National Electrical Manufacturers Association. It’s grown almost 6% from Q4 2010 to Q1 2011. The index is 18% above last year’s level and 40% over 2009.
The manufacturing sector led the way by jumping more than 9% on an annualized basis. Demand for industrial equipment and controls should stay high level for the rest of 2011, although the pace might slow. But increased capacity utilization, lower financing costs and better-looking corporate balance sheets should let businesses purchase equipment and machinery more reasonably. And those are the cocktail wieners at this year’s barbecue, complete with a nice jelly dipping sauce.
So, go ahead. At your Memorial Day picnic this weekend, dip. And then dip again. Indulge yourself. It’s summertime, and the living is easy.