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The latest Labor Dept. statistics showing a slight drop in the unemployment rate -- from 6.2% to 6.1% -- brought a sigh of relief at the White House on Sept. 5. Presidential spokesman Scott McClellan said more needs to be done to get the jobless rate down, but "the economy is continuing to pick up some steam and move in the right direction."
At the National Association of Manufacturers (NAM), however, the new jobless numbers set off alarm bells. The modest decline "cannot mask the loss of 93,000 more jobs -- 44,000 of them in manufacturing -- and should serve as a wakeup call to policymakers," said NAM President Jerry Jasinowski. "This is a lousy employment report as manufacturing has now lost jobs for 37 consecutive months."
Indeed, even amid growing signs of a robust recovery in some sectors, it's also becoming clear that manufacturing faces long-term structural problems. It's also clear that the Bush Administration's economic policies aren't turning things around for this hard-hit sector. While the President has maintained the strong support of most manufacturing execs, he can't afford the defection of the rank-and-file workers -- and the growing number of laid-off blue-collar voters -- from his 2004 reelection campaign (see BW, 9/15/03, "The Administration's Blue-Collar Blues").
MORE THAN CYCLICAL? If Bush is getting any good news, it's that the Democratic Presidential aspirants don't seem to have any sound solutions yet, either. This morass -- the loss of 16% of American manufacturing jobs since George W. Bush became President -- is a tough issue for both parties, with no easy answer.
The problem is obvious. American manufacturing jobs are being exported overseas. Everyone understands the reason: Companies are want lower labor costs, less red tape, fewer environmental restrictions, and even more trade subsidies offered by other nations.
A strong dollar in most recent years has made American-made products more expensive abroad and foreign-built wares less costly in the U.S. As Jasinowski says, "The armchair experts who say this is just another cyclical downturn are in a dream world, completely out of touch with today's competitive realities. This unprecedented loss of manufacturing jobs is due to structural changes in international trade, rising costs of production in the U.S., and the resulting cash-flow squeeze that forces job cuts."
Such structural changes are so troublesome because you can't put a big wall around the U.S. and keep foreign products out. You can't force cost-cutting American-based multinationals to spend substantially more money to make their products in more expensive U.S. factories. World Trade Organization rules prevent the U.S. and other nations from adopting protective tariffs on foreign-made goods. And rising productivity makes it possible for American manufacturers to produce their goods with fewer humans on the payroll (see BW, 9/15/03, "Productivity: Still Getting Stronger").
DEEP FROZEN. So what's the Bush solution? On Labor Day, the President announced he would soon name a manufacturing czar in the Commerce Dept. That's symbolism. The meat and potatoes of the Bush manufacturing strategy is tax cuts. The President is banking that his old tax cuts will free more capital for corporate investment. He also wants Congress to make permanent the temporary tax breaks for equipment expensing. And he wants to end the corporate alternative minimum tax.
Bush has also asked Congress to authorize his "reemployment accounts" for unemployed workers. The jobless could apply for a government grant of up to $5,000 to help them search for a job or seek retraining. If they find a job, they can pocket any money they haven't already spent. Sounds good. But GOP lawmakers have put Bush's plan in deep freeze, another victim of the budget squeeze caused by the ballooning costs of homeland security and Iraq.
While the President's proposals might help speed up a general economic recovery, few will help the hard-hit manufacturing sector bounce back more quickly. He recently dispatched Treasury Secretary John W. Snow to China to try to convince Beijing to end its policy of pegging the yuan to the dollar in a way that makes Chinese products bargains in the U.S. But the trip yielded no concessions.
Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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