Manufacturing Drops–Unexpectedly!
3rd June 2013
My, what a surprise! Aren’t you surprised? I’m sure surprised.
Glenn Reynolds initiated the “Unexpectedly!” theme several years ago; since then there have been countless news stories about the U.S. economy’s “unexpected” failures to perform. Observers generally offer micro-explanations based on trends of the moment. Currently, among other things, the minute sequester cuts are blamed for some portion of the drop in manufacturing.
But this narrow focus obscures the broader point: the American economy has performed terribly, by any objective standard, over the last few years. The recovery of 2009 to the present is the weakest–by far–of any postwar recovery. Unemployment and poverty are sky-high because economic growth is anemic. But why is growth so sluggish? After all, there are powerful forces that should be driving the economy forward, foremost among them the North American energy boom. Take the current data on manufacturing: it has been widely reported that manufacturing is returning to the U.S. because cheap energy here, the result of the shale oil and gas revolution, balances out lower labor costs in Asia. But if this is the case–and it is–then why is domestic manufacturing declining?