As politicians talk about bringing manufacturing back to America, there’s pretty compelling evidence that it never left, according to economist Bruce Yandle. In his latest economic analysis published by the Strom Thurmond Institute at Clemson University, Yandle projects “ho-hum” growth ahead, and he dusts off the old Misery Index.
“Using a healthcare analogy, the U.S. economy is out of intensive care,” Yandle said. “Better than that, the economy is walking the halls, gathering strength, and lifting heavier weights than before the great illness, or Great Recession.
“When the level of GDP exceeds that of the previous peak, we say the economy is in a growth phase, and that is where we are,” he continued. “But we are not comfortable saying that when unemployment is still above 8 percent.”
The U.S. hasn’t lost manufacturing muscle, but manufacturing muscle is growing worldwide, he said. He also points out that manufacturing employment peaked in 1979, but advances in machinery have increased productivity.
Companies that do not invest in their plants never fully recover.
“During a slowdown, the old obsolete plants get closed first, and never reopen,” Yandle said. “The more modern plants receive new capital, which uses less labor for the same amount of output. Productivity rises during recessions and then flattens out during recoveries.”
According to Yandle, by 2042 world production of goods and services will be twice as large as the sum of all past GDP generated on the globe.
“We can be a part of this great boom by investing in global enterprises, producing high tech products and services required for the booming world, and providing educational resources for the growing population of knowledge workers who will be the global builders,” he added.
In his economic analysis, Yandle discussed the Misery Index developed by economist Arthur Okun in the 1970s. Addressing unemployment and inflation rates, the index peaked during the Jimmy Carter administration at 21.9. The index fell rapidly, but started to climb in the late 1990s.
The Misery Index now stands at 11.4.
However, Yandle thinks there are new challenges that could be added to a new, expanded index. According to the latest census, there are now more than 9 million unattached family members age 20-24 back living at home. Also, the U.S. moving rate is now at the lowest since 1948.
What do you think? Do you agree or disagree with Yandle’s economic assessment?
Contact us and tell us what you think. You can also view Yandle’s full report online.
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