The Leaning of America

June 7, 2004
We don't see any hiring boom in forging or manufacturing in general in the near-term.

Early in February, the Labor Department reported that productivity — the amount that an employee produces for every hour on the job — in the American economy grew at a 2.7% annual rate from October through December. That rate represented a slowdown from the 9.5% rate for the previous quarter, but analysts stated that it still bodes well for the economy’s recovery.

During the recent economic slump, companies in all business sectors intensified efforts to produce more with fewer works. Over the 12 months of 2003, productivity grew by 4.2%. That followed a 4.9% increase in 2002.

Productivity gains are important to the economy’s long-term vitality. They allow the economy to grow faster without setting off inflation. Companies can pay workers more without raising prices, which would eat up those wage gains.

Also, productivity can bolster a company’s profitability. In the past, when their profits improve, companies typically were more willing to make capital investments and to increase hiring.

According to an Associated Press report, Wells Fargo’s chief economist Sung Won Sohn has observed, “There is no question that businesses — seeing demand grow — are hiring more people in response to slowing productivity gains,” said. “But, how many people will be hired going forward — that is really debatable.”

Federal Reserve Chairman Alan Greenspan also publicly expressed optimism that the jobs climate is getting better. “Although new hiring remains subdued,” he admitted, “other indicators suggest an improvement in the labor market”.

Economists like Greenspan and Sung are hopeful that companies will expand their work rolls in the months ahead as they work to meet customers’ demand.

To be sure, the hiring boom they’re looking for hasn’t yet happened. According to the federal Bureau of Labor Statistics, employment increased by 112,000 in January, with more jobs in construction and several service-providing industries, but the unemployment rate remained unchanged at 5.6%.

In manufacturing, however, employment continued to trend down, if at a more moderate job loss rate.

Why isn’t manufacturing employment rising? For one thing, that sector has been hard hit by competition from low-cost imports in recent months. For another, more and more manufacturing companies are relentless in applying “lean concepts” to their production and even how they are organized.

By the time you read this, the forging industry will have concluded another Jobshop Lean Workshop. In case, you missed the advance publicity, some of the topics discussed included Design Your Forge Shop for “Lean Flow,” Reduce Production Lead Times, Reduce Material and Labor Costs, Reduce Working Capital, Reduce Order Backlogs and WIP, and Achieve Maximum ROI.

We hope that business picks up for manufacturing, and especially for forgers. But we don’t see any hiring boom in forging — or manufacturing in general — in the near-term. The “lean” in American manufacturing is here to stay.