By Lloyd Graff

How much would you pay for a bottle of clean water if you were thirsty and could not find drinkable water? How much would you pay for a room if you had no place to sleep?

How much would you pay for a programmer for your CNC machines if they were down there was nobody to hire?

We are apparently in a period, or on the cusp of one, in which there are almost no skilled machinists available. In such an environment the logical thing to expect is that men and women with skills that the market demands will begin to auction their expertise to those who will pay the most. We may be entering the “gig economy” for machining people with quantifiable expertise. Smart entrepreneurs will develop websites that sell manufacturing skills by the hour or by the day. Businesses have employed freelance specialists for many years, but today’s Google economy is empowering more individuals than ever before.

The machining world has thrived in the land of the reliable and predictable—long-term clients, machinery that lasts for decades, dedicated employees who spend a career with one firm. It has worked pretty well for both employers and employees in a period of employment stasis.

Ten years ago, some companies in the machining world would have extra workers paint the floors when there was no production work. They had core people who they believed in and who believed in them. Today, life is quite different. Skilled people who dutifully worked loyally for humane owners have retired or died in many cases.

Private equity firms with professional managers own many medium sized manufacturing firms and are acquiring more every day. Their mission is to pay off debt, build equity and sell the businesses to the next firm in line. They have a short-term horizon which affects their view of employees. I would think that they would buy into the idea of a gig economy where employees auction their services, if that was necessary.

I think the gig economy has plenty of negatives for both employers and workers. I write this as somebody who has hired many gig workers for both Graff-Pinkert and Today’s Machining World. Paying for hotels and rental cars for the pricier freelancers can bite.

For workers, shifting to new work environments is scary and can wreak havoc with family life and relationships. Stable businesses with long-term employees develop community and rapport. Gig people are often not accepted easily in that milieu.

I think we have a real predicament in the machining world in late 2018. There’s lots of business, but not enough skilled people in the wings to hire. Owners and managers have a logical reluctance to upset the status quo by hiring new people for $10-$50/hour more than steady, loyal current workers. Meanwhile, they see contracts for the plucking or projects running late or unfulfilled.

Silicon Valley has lived with this dilemma for a long time. Workers have been drawn to the riches of the Valley, but the side effect has been sky-high housing prices and cost of living. The buses on Highway 280 and 101 are filled with folks who commute long distances for the wages in Palo Alto and Mountain View.

Most of the manufacturing in the Bay Area has moved to Nevada, which is causing a similar mini-inflation in Reno and Vegas.

For the moment, I expect a significant bump up in wages in the machining world. It will be hard to stomach for employers, who are dealing with tariffs and escalating metal prices. The result may be more work heading to Mexico and possibly China and Europe. But American manufacturers are extremely resourceful. They have weathered 20 years of headwinds. They will train young people, get by with fewer workers and hire the pricey experts when absolutely necessary. We will see the machinist as entrepreneur in isolated situations, but I doubt it will become the norm in the near future.

Question: In the future will more skilled machinists quit full time jobs to become freelancers?

By Lloyd Graff

Today, a blog about America—the politics and economics—as we head toward IMTS and Rosh Hashana (the Jewish New Year), which start on the same day in September.

Business in the machining world is thriving, though automotive is having just a little heartburn—not worthy of a Nexium, just a couple of Tums. The tariffs are barely biting yet, but the smell of them is screwing up the metals market that was smokin’ before President Trump shocked everybody by choosing to pick on aluminum and steel in order to wake up China and push a NAFTA deal through. Couldn’t he instead have chosen to penalize something like pickles and wrapping paper to make the point that America has been too nice for 25 years, and “we’re not going to take it anymore”?

Tariffs will cause a bit of a stink at IMTS 2018, but nobody, including Trump, knows if they will be a factor a year from now. The Chinese want to finesse it until Xi meets The Donald in November, and a new leader in Mexico may want to get off to an upbeat start in his tenure by negotiating a NAFTA compromise. With midterm elections in November and a bitter Supreme Court fight coming Trump could use a victory lap on his tariff gambit.

A word about the Brett Kavanaugh pick for the High Court. I don’t think the President truly cares if Kavanaugh is confirmed by the midterms. Trump paid his dues this time to the anti-abortion team by picking a strong Catholic with a Jesuit school education. His Gorsuch pick was the crucial one for him so he chose a pleasant, get-along, political guy who could smile his way through the Senate confirmation. Kavanaugh is another shrewd charmer, but the Democrats are totally dug in against him, and I doubt Republican Senators Collins of Maine and Murkowski of Alaska will vote for him even if he has soap in his mouth when questioned on his published opinions reflecting his views on Roe vs. Wade. If they vote against confirmation and Senator McCain abstains or votes against Trump’s pick, Kavanaugh is toast. This would allow Trump to pick somebody like Gorsuch who cannot be as easily categorized as Kavanaugh. I am making the assumption that the Republicans will hold the Senate in November. It is quite possible the Dems take back the House, however, from what I read.

The Democrats have a ton of money pouring into the House races, and a lot of old Republicans have walked away. The Dems have an enthusiasm edge and probably can overcome the gerrymandered districts they face.  It’s what we call democracy.

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Getting back to business, the country and Trump have been lucky and smart in his first two years. The economy had some momentum eight years after the deep recession had devastated the country. President Obama fortunately was such an ineffective leader during his second term that he could only slow the economy down, not derail it.

Trump has been so quixotic and disinterested in Congress that he was unable throw out Obama Care. By losing the fight and being shrewdly disinterested in health care politics he was able to focus on getting a giant tax cut passed, with big positives for business. To the Democrats’ dismay the economy has roared since its passage. The economy has stunned the growth doubters by showing 3.9% unemployment and 4% growth last quarter. These are numbers many folks on the Left and Right thought we would never see again. Reducing government regulation and pooh-poohing the climate change fanatics without much push-back from the real people in both parties has shown mainstream politicians that environmental causes have little national traction, while economic well-being does.

Low unemployment makes strange bedfellows. The Dems portray Trump as a racist, yet Black unemployment, even in the worst areas, is shrinking. People getting out of jail can actually find jobs. The real minimum wage is rising rapidly even without legislation because companies will pay up if they need workers. Home sales growth is slowing in some areas because fewer folks are moving to find work, though the prices of existing homes are still being pushed up because family formation is finally rising again. Money is pouring into the United States with the repatriation of corporate profits that have been stuck overseas by repressive American taxation. The Fed is trying to push up interest rates, but the 10-year bond which dictates home mortgages continues to resist 3% because the world wants to buy the U.S. 10-year.

Most people think Trump is a scoundrel, personally. I think the Mueller investigation is a witch hunt even though it is demonstrating quite vividly that politics is a very dirty business with a lot of scummy folks. Is that news? If Mueller could nail Trump we probably would already know it.

Personally, I think Trump’s immigration policy is deplorable and bad politics. It appears that Attorney General Sessions is a nut on the topic of keeping America as much like his image of his idyllic Alabama as possible. I wonder if the Administration’s goofy anti-foreigner stance is an effort by Trump to keep Sessions on the reservation. A President always wants to keep the Attorney General on his team.

You probably disagree with some of these opinions. I’d love to read your comments and hope to see you in Chicago for IMTS. It’s going to be a lively one!

Question: Has Trump hurt you or helped you economically?