President Trump announced, “We have created 5.3 million new jobs and importantly added 600,000 new manufacturing jobs.” Half a million manufacturing jobs in just two years - true or false? We take a closer look in this week’s news segment.
Big Disclaimer: We don’t like to get political on MakingChips. If you’re a regular listener you already know we do our best to keep a narrow focus on equipping and inspiring the metalworking nation with information, resources, and the occasional snarky banter to keep it interesting. So, have no fear! This is no right--wing, left-wing, middle-of-the-road manifesto. But 600,000 new manufacturing jobs in two years? It would irresponsible to keep our mouths shut about those numbers.
There’s a ton of investigative news articles out there breaking down President Trump’s January 20, 2019, State of the Union address to the nation. We chose The Washington Post’s article, “Fact-checking President Trump’s 2019 State of the Union Address”, for no particular reason except it’s pretty straightforward, and the first fact they check is Trump’s statement that, “We have created 5.3 million new jobs and importantly added 600,000 new manufacturing jobs.”
True or False?
Even though these numbers are slightly off from Trump’s statement, politics aside, it’s still pretty awesome. Considering under President Barack Obama we gained only 900,000 manufacturing jobs in the seven years following the lowest financial point of the Great Recession, to see more than half that number gained in just the last two years is something to shout about.
But before you start ordering those party balloons . . . .
The fact is, the number of manufacturing jobs in the U.S. is still nearly 1 million below the level at the start of the Great Recession in December 2007. As Jim mentioned in this week’s MakingChips podcast, those were dark times for all of us in manufacturing, and Zenger’s, Carr Machine & Tool, and Advanced Machine & Engineering were no exception.
Thinking back on 2008, Jim remembers just suffering, as a manufacturing business owner, living in a state of flux, with sales plummeting fifty-percent and no new work coming in. Really these were, collectively, our darkest days. In light of this week’s news focus, Jason wondered if maybe there’s another recession on the horizon?
Blinded by the light
Ok, ok, we’re here to equip and inspire, not to cause fear and loathing or add to any unfounded speculation in either direction. The fact is it’s almost impossible even for the top economists in the world to predict a straightforward answer to Jason’s question.
If you were listening closely to the podcast you might have picked up on a little friendly goading between Jason and Jim, as Jason pressed Jim on his 2019 predictions for Carr Machine Tools, which are based primarily on customer purchase orders.
In spite of Jason’s reminder that customers could push out orders and you can’t invoice them on things they don’t buy, Jim said he still feels 85% confident 2019 will be a good year. And ould you believe, Forbes magazine supports both Jason’s and Jim’s positions?
According to a December 2018 article, Another Warning That A 2019 Recession Is Coming, contributor Raul Elizalde, points out, when looking at measures such as retail sales, industrial production, and employment, the U.S. economy does not seem to be on the brink of slowing down. However, looking at history, it is, in Elizalde’s words, “a perverse fact” that in the past these exact measures have been at their highest points, even at record levels, just before falling a few months later under the weight of an economic downturn.
Elizalde cites studies that show forecasters are generally blindsided by recessions, precisely because they tend to be preceded by economic strength. Um, Jim? How secure are those purchase orders?
And if we look just at the industrial sector, it gets even a little scarier. A January 1, 2019 article published by Barron’s is quick to point out that 2018 wasn’t a banner year for the industrial sector. The S&P 500 Industrial Sector Index declined nearly 16% in 2018, wiping out more than $350 billion in market value. And every major industrial subcategory from auto manufacturing to energy posted double digit declines.
Yet, despite last year’s numbers, the article remained optimistic for the industrial sector in 2019, noting that, on the factory floor, discrete automation and artificial intelligence are starting to have greater impacts on manufacturing. And, while multiple expansion for industrials may be too much to hope for in 2019, stock gains aren’t. The author notes that since 1990, the industrial sector has only had one back to back down year, and that was in the aftermath of the dot-com bubble in 2001 and 2002.
If all this has your head spinning, you’re not alone. The fact is there’s no simple answer to Jason’s question as to whether or not there’s a recession on the horizon in 2019. Jim says he has a crystal ball that helps determine future - as crazy as that sounds, his abstract mysticism and promising customer purchase orders actually seem to give him a significant advantage over the top economists of our time, who basically have this to offer: ¯\_(ツ)_/¯