The Impact Of China On U.S. Manufacturing

Assembly

The recent growth in manufacturing imports to the US is largely a consequence of China’s emergence on the global stage coupled with its deep comparative advantage in labour-intensive goods. The jobs in apparel, furniture, shoes, and other wage-sensitive products that the United States has lost to China are unlikely to return. Even as China’s labour costs rise, the factories that produce these goods are more likely to relocate to Bangladesh, Vietnam, or other countries rising in China’s wake than to reappear on US shores.

Further, China’s impact on US manufacturing is far from complete. During the 2000s, the country rapidly expanded into the assembly of laptops and cell-phones, with production occurring increasingly under Chinese brands, such as Lenovo and Huawei. Despite this rather bleak panorama, there are sources of hope for manufacturing in the United States. Perhaps the most encouraging sign is that the response of many companies to increased trade pressure has been to increase investment in innovation (Bloom et al. 2011). The ensuing advance in technology may ultimately help create new markets for US producers. However, if the trend toward the automation of routine jobs in manufacturing continues (Autor and Dorn 2013), the application of these new technologies is likely to do much more to boost growth in value added than to expand employment on the factory floor.

The rise of China and the future of US manufacturing

Weekly Initial Jobless Claims Tick Up To 293k

Initial jobless claims for the week ending September 20 were a seasonally adjusted 293k, up from the prior week’s revised reading of 281k. Not seasonally adjusted, jobless claims for the week were 239k.

Claims

Individual states that had changes in claims of more than 1k (not seasonally adjusted):

STates

The 4-week moving average of initial jobless claims was 299k.

Claims 4W

The number of unemployment insurance recipients, or continuing claims, for regular state programs was 2.439 million, up from the previous week’s revised reading of 2.432 million.

UI Recipients

The insured unemployment rate, which is the number of unemployment insurance recipients as a share of covered employment, was 1.8%, unchanged from the week prior.

IU Rate

90.3% of all U.S. jobs are covered by state unemployment insurance programs.

Covered Employment

Of the 9.591 million Americans currently unemployed, 25.43% receive unemployment insurance.

UI Share

Jobless claims and the unemployment rate:

Labor Market

CFNAI Falls To -0.21 In August

The Chicago Fed’s National Activity Index (CFNAI) was a reading of -0.21 in August, down from July’s revised reading of +0.26. The negative figure indicates that the index is below its historical trend. The index’s 3-month moving average is at +0.07.

45 of the 85 individual indicators made positive contributions to the CFNAI in July, while 40 made negative contributions. 42 indicators improved from July to August, while 43 indicators deteriorated. Of the indicators that improved, 12 made negative contributions.

The total index was dragged down by the Production and Income component which registered -0.17 from +0.24 in July. Employment and Hours was an even 0.00 from +0.10, Personal Consumption and Housing was -0.12 from -0.13, and Sales, Orders, and Inventories was +0.08 from +0.04.

CFNAI Components

CFNAI

CFNAI Production

CFNAI Employment

CFNAI Consumption

CFNAI Sales

The CFNAI is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories. Each of these data series measures some aspect of overall macroeconomic activity. 

It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

State Unemployment Rates In August 2014

In August, the unemployment rate decreased in 15 U.S. states, increased in 24 states and the District of Columbia, and was unchanged in 11 states.

The unemployment rate is higher than a year ago in only 3 states, Alabama (6.9% vs 6.5%), and Alaska (6.8% vs 6.7%), and West Virginia (6.6% vs 6.5%).

Recall that the national jobless rate in August was 6.1%.

State Unemployment

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Weekly Initial Jobless Claims Decrease To 280k

Initial jobless claims for the week ending September 13 were a seasonally adjusted 280k, down from the prior week’s revised reading of 316k. Not seasonally adjusted, jobless claims for the week were 241k.

Jobless Claims

The 4-week moving average of initial jobless claims is 300k.

Jobless Claims Long

The insured unemployment rate was 1.8%, down from 1.9% the week prior.

Insured Unemployment

The number of unemployment insurance recipients, or continuing claims, for regular state programs was 2.429 million, down from the previous week’s revised reading of 2.492 million.

UI Recipients

Individual states that had changes in claims of more than 1k (not seasonally adjusted):

States

Jobless claims and the unemployment rate:

Labor Market

Weekly Initial Jobless Claims Increase To 315k

Initial jobless claims for the week ending September 6 were a seasonally adjusted 315k, up from the prior week’s revised reading of 304k. Not seasonally adjusted, jobless claims for the week were 234k.

Jobless Claims

The 4-week moving average of initial jobless claims is 304k.

Jobless Claims Long

The insured unemployment rate was 1.9%, unchanged from the week prior.

Insured Unemployment

The number of unemployment insurance recipients, or continuing claims, for regular state programs was 2.487 million, up from the previous week’s revised reading of 2.478 million.

UI Recipients

Individual states that had changes in claims of more than 1k (not seasonally adjusted):

STates

Jobless claims and the unemployment rate:

U-3 and Jobless Claims

U.S. Hiring At Highest Rate Since 2007

U.S. job openings were little changed in July at 4.673 million from 4.675 million in June. Hires increased to 4.872 million from 4.791 million.

JOLTS

The number of unemployed workers per job opening increased to 2.07 from 2.03.

Unemployed per Opening

There were 4.559 million separations in July. Quits increased to 2.517 million from 2.484 million, layoffs and discharges increased to 1.659 million from 1.657 million, and other separations increased to 0.383 million from 0.379 million.

Separations

The ratio of quits to layoffs and discharges increased to 1.52 from 1.50, which is a positive sign and indicates people are more comfortable leaving their jobs.

Quits to Layoffs

Subtracting total separations from hires, net labor turnover for the month is suggested to be an increase of 313k jobs.

Hires and Separations

That 313k is substantially higher than the 212k nonfarm payrolls added as reported in the employment situation release.

NFP JOLTS

BLS

The Beveridge Curve shows the relationship between the unemployment rate and the job openings rate (job openings as a percentage of the total employed plus job openings).

Beveridge