Good Riddance to 2008—and a Look Ahead

According to the report, “[c]onsumers claiming business conditions are ‘bad’ increased to 46.0% from 40.6%, while those claiming business conditions are ‘good’ declined to 7.7% from 10.1% last month. Consumers’ assessment of the labor market was also considerably more negative than a month ago. Those saying jobs are ‘hard to get’ rose to 42.0% from 37.1% in November, while those claiming jobs are ‘plentiful’ decreased to 6.2% from 8.7%.”

The November 2008 Manufacturing ISM Report On Business showed the PMI at 36.2, down from 38.9 in October and the worst since May of 1982, with new orders, production, employment, supplier deliveries and almost everything else worse than the previous month.

The Federal Reserve Bank of Chicago reported on Dec. 28 that its Midwest Manufacturing Index (CFMMI) decreased 1.6% in November, to a seasonally adjusted level of 96.4 (2002 = 100). Revised data show the index decreased 1.2% in October, to 98.0. The Federal Reserve Board’s industrial production index for manufacturing (IPMFG) decreased 1.5% in November. Regional output in November was down 10.8% from a year earlier—lower than the 7.3% decrease in national output.

Dow Chemical’s bid to buy Rohm & Haas suffered a possibly-fatal setback when the government of Kuwait cancelled a planned joint venture.

Things can only go up from here, right?

Looking ahead, there has been praise from multiple quarters for president-elect Obama’s pick for secretary of Energy, Steven Chu, winner of the 1997 Nobel Prize in Physics and currently director of the Lawrence Berkeley National Laboratory. Chu is an outspoken advocate of scientific solutions to global warming and the need for carbon-neutral renewable sources of energy, according to his biography. While this might give pause to some in the fossil fuel industries, CNN Money reported on Dec. 23 that Tom Kuhn, head of the Edison Electric Institute, had good words to say about Dr. Chu, and that even the National Mining Association has withheld judgment until it sees which way energy policy will go. And, says Oil & Gas Eurasia, “Chu will have to walk the diplomatic tightrope with OPEC.”

Obama’s choice of U.S. Senator Ken Salazar (D-CO) as Secretary of the Interior is of great interest to the petroleum industry, since he has in the past attempted to delay federal oil shale leasing, according to Oil & Gas Journal, and the International Herald Tribune reported that Salazar had said that developing energy independence “would include not just the development of ‘green’ energy sources like wind power, but also the continued domestic development of coal, oil and natural gas.”

On a hopeful note, I’ve been working on an article for Valve Magazine about Lori Garrett, who is in charge of valve repair at Eastman Chemical in Kingsport, TN, part of the magazine’s Manufacturing Woman series. Hers is a remarkable story, and she’s a good example of doing things the right way and getting ahead by one’s own efforts, and I hope more women follow in her footsteps. We need more women to enter the manufacturing field for two reasons. One is simple equity: It’s wrong to discourage qualified people from entering any field they choose. The other is that we need to grow manufacturing. There have been many claims that the United States is becoming or has become a post-industrial society, and that the service sector will completely dominate our economy. But that works only if those services bring money into the country. We cannot build an economy on taking in each others’ laundry, and only those services that require a physical presence are safe from being outsourced to other countries.

At the same time the government’s efforts to keep the economy from collapsing are adding huge amounts to the national debt. At one time optimists would dismiss the national debt by saying it’s money we owe to ourselves, but now much of it is owed to other countries. About 25% of U.S. public debt is held by foreign governments (2007 figures). As of September the People’s Republic of China and Japan were the largest holders, with each accounting for slightly more than 20% of foreign-held U.S. public debt, followed by the U.K. at just under 12%.

A larger percentage is “owned” by the U.S. government — much of it by the Federal Reserve and the Social Security trust fund. That trust fund that so many of us count on to provide at least some cushion in our later years (well, at least many of us over the age of 50 or so are counting on it) consists entirely of IOUs. There’s no actual money there.

To put it plainly, the United States needs to grow its manufacturing sector and increase exports. The more of domestic demand we can fill with products made here, and the more we can export to other countries, the better our current account balance. At the moment we are, as a nation, borrowing money to pay day-to-day expenses, and anyone who has fallen into that trap can tell you it’s a sure path to bankruptcy.