Silver as an investment

More Measures of U.S. Manufacturing Weakness / by Alan Tonelson • November 30, 2015

RealityChek has looked at U.S. domestic manufacturing’s health through the lenses of employment, wages, output, trade balances, and productivity. All have revealed a pretty dismal picture these days. But since manufacturing renaissance claims still persist, here are two other indicators that strongly suggest that the sector is hardly in a golden age – the numbers of manufacturing establishments and firms in America.

Among those who closely follow the sector, it’s widely recognized thatthere’s been major shrinkage in the number of manufacturing establishments in America since the early 1990s. But that number has always been a little fuzzy, because “establishment” can mean “individual facility.” Since manufacturing’s efficiency has kept growing for most of this period, fewer establishments could partly, or mainly, mean that companies are simply closing factories or other assets that are no longer needed to maintain or even increase output levels.

Luckily, surfing around U.S. government data sites today, I’ve found two statistical series that allow more definitive conclusions to be drawn. The first comes from the Labor Department, and consists of figures on establishment births and deaths by industry that are part of the Business Employment Dynamics data I used recently to shed new light on manufacturing employment. As suggested by the name, establishment “deaths” don’t come back to life whereas “closing” decisions can be temporary for a variety of reasons – including seasonal fluctuations in demand and work flow. Deaths can still stem from greater efficiency, too, but logically more of them reflect declining fortunes in the sector.


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