I'm perusing the just-released Department of Commerce figures on manufacturers' shipments, inventories, and orders for August, and I want to believe the news is good. I really, really do.
But who can honestly tell? If you look at Bloomberg's coverage of the news, it smartly dove to the bottom of the press release from the Census Bureau (part of the DOC) to extract what's pretty much the lone, unqualifiedly positive nugget: "Orders for US capital equipment increased in August by the most in three months, a sign business investment and exports held up in the face of mounting concern over the European debt crisis."
Not so sanguine was the Wall Street Journal, which took its guidance from the Census Bureau's more somber lead and overall tone. Here's the WSJ take: "Orders fell for US factory goods during August, the second drop in three months as manufacturers struggle to keep growing within a weak economy."
Surveying all the stories on Google News, I'd say the good-bad coverage was split down the middle. Some organizations went with the almost neutral lead that factory orders fell only 0.2 percent in August.
Me, I'm not an economist. So I ask myself what all these numbers mean for engineers. This brings me pretty quickly to one of three conclusions:
Capital equipment orders were up. Hurray, we're in Fat City.
Factory orders are down. We're all screwed. Get ready for the unemployment line.
These numbers don't change anything for me day to day, so I'm keeping my head down and doing my job.
If you buy into No. 1, you're clearly deluded (or demented). No. 2 is unnecessarily negative. If you have a job, you don't want to be focused on the 16 percent of Americans who don't. Fear forestalls the ability to function. Plus, as our recent Design News salary survey showed, employed engineers aren't doing that badly.
So I'm going with No. 3. Some might characterize this as a "head in the sand" response analogous to what we see when there's a political discussion in a trade publication, and the response is "I expect you to stick to technology."
Hey, anything that impacts one's life impacts technology. In this case, there are two salient threads at work: pent-up capital and exciting, emerging technologies. The status of both, I believe, makes my response more sensible than it would otherwise be when observing a laggard "lost decade" economic landscape. Let's take these one by one:
Pent-up capital. If you talk to executives, you find an undercurrent of mystification as to why manufacturing is stuck in a rut. The US has an aging plant and needs investment to compete effectively with the rest of the world. (Read how the Siemens executive Raj Batra put it in June.) Moreover, rising fuel and shipping costs mean some manufacturing that's gone overseas can cost-effectively return stateside. Finally, businesses are sitting on craploads of cash.
Exciting technology. However gloomy you might be, you cannot tell me now is not an exciting time in technology. There's so much innovation staring us in the face and waiting to be embraced and driven forward. Miniaturization in medical devices. Advanced aerospace and automotive composites. The emergence of the digital factory of the future. I could go on and on, but if one decouples the dreary daily economic news from the sizzle that's out there on the engineering side, one could actually become pretty optimistic.
We've all heard it a zillion times now: recovering from a recession caused by a financial crisis takes longer than recovering from a "normal" recession. For most of us, recessions have been V-shaped. We go down quick. After a couple nasty quarters, we're headed back up. Wow, sure are things different now. The current recession began in the fourth quarter of 2007. And while the recession was officially over by mid-2009, this recovery sure feels like a recession.
I'm not an economist either, but Alex talks about seeing an increase in innovation. Many say that's the sign to look for. The pick-up in innovation is dawn's first light in a substantial recovery. If that's so, bye-bye double dip.
I agree with your take, Rob, and with Alex's inclination to not go down the path of panic and doom and gloom. While I can't say I'm exactly optimistic, it seems like if you look at the numbers around manufacturing and company's financials, the picture isn't all that bad, especially in the context of Rob's points about a U-shaped, slower recovery being more the norm after a recession caused by financial crisis. Maybe along with putting our nose to the grindstone and focusing on work, we should all try to see the positive. Half the battle with this on-going economic dulldrums is perception.
It may take a government effort to get jobs moving. Why not fund a real project, say to DESIGN and BUILD the prototype next generation nuclear reactor, with the caveat that the company also consider it a CCC-style jobs project?
Supercollider.
Bridges.
Pick one that is "for the common good", and build it. Not "unemployed retraining". MAKE something.
Alex, I like your Point/Counter-Point argument, and find myself nodding quietly in agreement with both extremes. Because things are so turbulent, nothing is going work - - - at least at the moment.
To the Counter-Point; we are in a saw-tooth economic market; up 300 points one day and down 250 the next. Who can blame any company for not investing in equipment or expanding staff if they think their stock could face a potential slashing on any given day-?Wall Street investors are as unstable as a school of herring, darting "to-n-fro" on only the slightest information.
But to the Point, innovations are quietly budding in the labs, in the factories, and even wading into some cautious markets.(All good comes around, eventually). But the general investment population has been so beaten-down that even golden-hot-cakes would be met with only a tepid response today.
If we could just turn down the turbulence, the knee-jerk recoils would also settle down.
As a former defense contractor now teaching the innovation process in academia, I ascribe to the Wharton School's description of the Five (5) components of society, namely, Wealth, Truth, Membership, Values and Power. As with any spinning system, things run "smoothly" when the components are in balance. Affect that balance and things whirl out of control quickly, exibiting higher-order modes of oscillation.
My current view from the ivory tower is that the Power dimension is at odds with the other four. The Wealth component has much innovation to leverage thanks to the Research & Development (Truth & Membership) components, however due to uncertianty in short and long term costs of human and financial capital, regulations, and liability the sideline is currently the safest place to be until "the ride" smooths out.
Regardless of political idealogy, it looks like things will stay status quo at least until the 2012 elections when the uncertianty in the Power component has a chance to subside.
Predicting a nation's economic performance is nearly impossible, but I'd say there's good reason for engineers to keep their heads down and hope something good is coming. I agree with Bloomberg's take: If orders for capital equipment are up, that bodes well. Fat City? No. But there's reason for some optimism.
There is a bit of a viscous cycle going on behind the manufacturing report. The main reason manufacturing is tepid is because unemployment is high. Unemployment is high because manufacturers, among others, are hesitant to hire. I'm not a fan of big government spending, but to break this cycle federal jobs programs may be necessary.
I would agree to the extent that ideology(ies) have made it impossible to have an honest discussion of the dynamic in play, and therefore of a solution. This is perhaps another way of saying it'd be nice if the preponderance of people in Congress were engineers, rather than lawyers.
Good point that those in Congress should be engineers. Lawyers thrive on conflict. As for hiring, when companies cannot meet demand without hiring, they'll hire. If they can meet demand without hiring, they won't hire.
Usually, once a recovery begins, companies bring on part-time and temporary workers just in case the upward tick in demand does not sustain. That's where we seem to be now. And it seems like we've been there for about two and a half years.
The upward tick in the electronics industry softened over the summer. U.S. demand for electronics went flat in August. Inventories are at a two-year high (US Gov.). So hiring may be a bit sluggish in the electronic industry.
I have to differ with the thought that we need more engineers in government, if only because the two most prominent engineers (Herbert Hoover and Jimmy Carter) were not exactly highly ranked in the list of effective/successful U.S. presidents! This wouldn't invalidate the idea of encouraging more involvement by engineers in the political process; having a few more in Congress (both houses) would probably benefit the nation, especially if they replaced either a lawyer or one of the many making our laws who have been feeding from government troughs for their entire careers, never participating in the private economy at all.
I've been in manufacturing (electronic) for about 40 years. My biggest problem
other than making payroll has been regulations. I don't want to destroy the
planet and have never tried. If I want to paint, plate, clean, move, update, solder,
ship, import, export, connect, disconnect, erect, remove, hire, fire, you get the
point, I run up against ENDLESS regulations ALL of which cost money.
On top of that I have contend with the price fluctuations of copper, magnetic materials, steel, aluminum, etc. created by some guy in New York because he can make a buck by trading those daily or hourly.
A few years ago I purchased a mercury lab thermometer from a scientific supply company. The thermometer was $7; the hazardous material handling fee was
$10 (and I picked it up at their dock). I'll bet the guys in the far east don't pay that.
On top of that I have to predict the future to know when wall street is about to create the next recession. My employees have always been like members of my family. Some of the worst
days I've ever had was having to lay off someone. Sorry for the rambling but
I'm ready to move to Vietnam to open a factory. I'll bet that government would
I tend to ignore the words of those who really don't know, and those who clearly have some agenda that appears to be sowing dispair.
Rob is correct in that between the constant addition of government regulations and the constant wall-street manipulations, there must be a lot of "nonproductive" money spent.
The first thing that the government could do is to change the laws so that speculators would need to have cash instead of being able to use credit. Yes, I am fully aware that it would place them at a much greater risk of loss, which is exactly what must happen. Excess credit for speculators was one of the major causes of the Great Depression. Didn't the government learn from that? As an engineer I could see that cheap speculation caused our fuel price spikes, why couldn't the economists see that?
At the same time, to encourage production, the government should relax the controls on credit for infrastructure a bit, in order to encourage investment in real assets.
Of course, to do any of this will require some working togather from both sides of the aisle, which lack of has certainly slowed whatever recovery we could have had. That is not intended to be an endorsement of either side, just an assertion that doing something besides fighting could make progress of some kind.
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