Why is my business so good if the economy is so bad?

CBS news announced in January that Austin, Texas, leads the U.S. in job growth and CNN has it in its list of the 10 fastest growing cities

I attended the Precision Machined Products Association’s annual meeting in Austin over the weekend. The question I heard often was, “Why is my business so good if the economy is so bad?” Unfortunately the speakers hardly addressed this topic, so I will try to explain it.

1) Structural changes in the world economy now favor American manufacturing. A lot of businesses have gone away in the last 10 years. They’ve closed, moved to China, downsized, gone bust, or merged—and not much has started up in the last decade and a half. Manufacturing was downsizing in the ’90s but it was masked because of the Internet and telecom boom.

2) Automotive is coming back, but we mistakenly think of automotive as just GM, Ford and Chrysler—American vendors are doing a lot of work with Toyota, Honda, and Mercedes, too. High yen and Euro values relative to the past make America a low cost producer.

3) Relentless productivity advances in manufacturing makes for better margins. The press mistakes “restructuring” and cutting people as indicative of bad business. It may be the reason for continued good business. Head count and profits no longer rise together and even the Wall Street Journal misses it.

4) Contrary to popular opinion we are starting to get better young people to join manufacturing. Old people always think the younger generation is shiftless and inept, but I think that the notion that you cannot recruit capable new people is obsolete in this labor climate. Nonexistent desk jobs no longer look appealing next to $80,000 machinist jobs with benefits.

5) China is struggling to compete—wages are rising 15-20 percent per year, the workforce turns over constantly, there is a shortage of skills, and high-energy costs. The realization of what it really costs to make things in China with the travel, logistics, and quality issues has made outsourcing to China less attractive for American firms.

6) Innovation. If you look at big companies like Apple, Cummins and Amazon.com you see that America still has game. Add the brilliance of our farmers and the revolution in oil and gas production with horizontal drilling and you see a core economy that is thriving and world class, but one does not necessarily hire unemployed 56-year-old bankers.

All of this does not mean that Europe is not a mess and that retired Chicago teachers are going to get the pensions that were promised them for the next 50 years. The world economy is in the throes of a nasty restructuring not that different than what American manufacturing has gone through for the last 15 years. I like our odds. I wouldn’t bet on the French though.

Question: Do you feel optimistic about 2012?

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16 thoughts on “Why is my business so good if the economy is so bad?

  1. Joe C

    Now you just need to get this through to the rest of the media and Washington. Maybe then people would concentrate on our growth and not all the negativity.
    I agree with you 110%. I see a lot of growth among the manufacturing sector of this country. People do forget about the “Foriegn” makers that have several locations and 1000’s of jobs here in the USA. Plus all the other businesses supplying those businesses and all the steel mills producing materials to make these products. Manufacturing growth will continue here but it will be with our youth and the progress of more automation. They can grasp the concept of these new tools and will push this country back to the top.

  2. Steve Hillard

    Lloyd, another example of whay your article is one I read every time. Kudo’s well said. and maybe other folks won’t be sheppish to adimt “they’re doing ok”!

  3. Robert Humphreys

    Hello Lloyd, a well written summary of the current situation regarding manufacturing in the US today. I would like to add that US manufacturing has and will continue to increase output even though head count has reduced, this is due to use of new technologies and automation. Automation of manufacturing processes increases output vs. labor and as a result makes manufacturing companies more competitive in the global market. Robert Humphreys

  4. Elizabeth Barr

    This is all positive and good to read. And you are right, it has been evident to those of us in the trenches. In my view, it boils down to managing your business well, anticipating risks, growing your workforce through specified training programs, and having a good quality management system in place to measure and monitor your quality output. Another thing I have to say: $80,000 machinists? Not at my shop…

  5. Frank Gibbons

    Hello Lloyd: Very interesting, and accurate observation on the “State of the Manufacturing Economy” The Media doesent get it, the Politicians dont get it (some are finally talking about the importance of Manufacturing), but in general all of my customers are very busy, and our suppliers(MAZAK & STAR) are pressing very hard to increase output to keep up with demand.

  6. Daniel Richter

    Everybody I talk to is busy and I see a lot of jobs out there. If we would stop offering 99+ weeks of unemployment, people would get a job. If you pay people to not work, they won’t. “If you want less of something, tax it. If you want more of something, subsidise it.”

  7. Matt Klecka

    People are busy, and from shop-to-shop optimism abounds. I actually found myself at a wedding this weekend, sitting next to a 30 year old who had left the accounting world for the plating industry. I believe manufacturing is truly making a comeback and its not a phenomenon just seen in the pages/figures of economic reports but is tangible on the shopfloors and factories across the country.

    Jumping on what Daniel posted above. I actually read what I found to be a interesting anecdote this morning. It was written by an author named Janie Johnson. She noted, “(they) tax cigarettes and alcohol to reduce consumption, so why do they tax capital and job creators?”


    Lloyd: About 20 years ago I saw the re=emergence of vocational education in the form of Community College courses. Often when I went to a mall to shop I saw a display of made items. Machined, Joined and all the other skill trades. We now see the investment of foreign companies in the states which put their faith in this type of education. Industry below the rust belt did not need a bailout and the government wasn’t able to grab their assets.

  9. Charlie

    You are in the money. We have found customers have abandoned China for the reasons you site. The great USA is competitive and can be even more so. I dare say until we have a leader who will grant us predictability, consistency and who will actually lead us, all of us as one nation and not try to fracture us as we/they; many employers will be very conservative on hiring. The good news is, it is better out there than any of the main stream media will admit or report on. You have to dig for the good news but it is there.
    In Wisconsin we are open for business.

  10. Fred Gabriel

    I agree with your uplifting comments! Just think how even greater our busuinesses would be humming if China was not allowed to manipulate thier currency and played by the same rules as us Americans!

  11. Lloyd Graff

    I’m Sally Fields at the Oscars ceremony. “You love me. You really love me”. Now I think I must be dead wrong. I don’t trust being popular. If the flavor of the day is Pistachio I want to be RumRaisin. Now I better hide under the mattress and short Caterpillar. I am scared of optimism. It makes me think bubble. Please, somebody call me a Pollyanna so I can peek out from under the blankets.

  12. Mike Sizemore

    Great article. One of the best things that happened during this bad economy is that it made American companies work smarter.

  13. Nancy Burrows

    Lloyd, this is why I am so glad you will be a member of our panel at the South Suburban College Manufacturing Workforce Development Conference on November 16 at UCC (16333 S. Kilbourn, Oak Forest). All you readers, register and join us!
    Yours is a refreshing outlook. Others in the field are peeking out from under their blankets, too, but there are still far too many who don’t get it.
    Nancy Burrows nburrows@ssc.edu


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