AI – Norma Rae Meets Her Match by Danielle DiMartino Booth
One woman, one word, one sign held high above her head standing alone and defiant atop her work table: “UNION”
For those who have seen 1979’s Norma Rae, it is impossible to forget Sally Field’s Oscar-winning portrayal of a textile worker who defies the establishment for the greater good. That real-life scene, which ignited a movement to unionize, took place on May 30, 1973 at the J.P.Stevens Textile mill in North Carolina, then the country’s second largest textile manufacturer. The real Crystal Lee Sutton would be fired that very day but would find eventual redemption in unionizing and would not only be reinstated, but receive back pay to boot.
Sutton’s drive for change was rooted in her own roots as a second generation mill worker who witnessed her parents’ lifetime of work for that same company, J.P. Stevens, amount to nothing. After 30 years, they had one week of paid vacation. Her then husband, a unionized paper mill worker, had four weeks of paid vacation.
As today’s clarion calls for a higher minimum wage rise to a fevered pitch, it’s worth noting that in inflation-adjusted dollars, Sutton was making nearly $15 dollars an hour. She wanted more and got it, but, sadly, it should be noted that unionization didn’t just land them better working conditions and benefits. It bought mill workers something their 1970’s era minds could never have envisioned. From that zealous bargaining, higher everything emanated swelling cost structures overnight and laying the ground work for the subsequent gutting of the south’s textile industry.
To take but three statistics: In 1948, 40 percent of North Carolina’s jobs were in textile and apparel manufacturing. By 2013, that share had plummeted to 1.1 percent. Across the nation, more than 100,000 textile jobs were lost in the decade to 2013. In all, 650 plants were closed between 1997 and 2009.
In the end, it was of course, the ever-growing reality of cheaper overseas labor that sounded the textile industry’s death knell. With the seemingly endless supply of cheap foreign labor, we are left to wonder if it’s even possible to find a way back to domestic jobs and production. Voters are certainly clamoring for as much. If the shale revolution and theoretical infrastructure investment have taught us one thing, it’s that those able and willing to become skilled laborers easily overcome the lack of a college education and contribute greatly to economic growth.
As if an answer to prayers, some textile manufacturing has returned to the United States care of a sufficient overseas cost-advantage reversal. But today’s sector is a far cry from the same labor-driven industry mill workers of yesteryear knew. With increasing automation, only a fraction of the kinds of jobs prior generations of employers provided the less-educated working masses are created. One South Carolina mill featured in a 2013 New York Times story then employed 140 workers to produce 2.5 million pounds of yarn a week. In 1980, it would have required 2,000 workers to maintain that same level of production.
It is thus utterly amazing to hear both candidates claim that they can bring millions of lost jobs back home. Partisan groups that rally for reshoring cite that 67,000 manufacturing jobs were created in 2015 compared to 12,000 in 2003. While these figures don’t lie, they tell only part of the story. No doubt, labor and transportation costs have risen in some overseas locales, prompting some jobs to return home. But streamlined operations and non-unionized workforces have also helped the math work.
Nevertheless, 53 percent of U.S. manufacturers still outsource jobs though they are anything but the biggest contributor to the 2.4 million jobs that were outsourced last year. The winning prize for most at-risk careers goes to computer programmers and software engineers, some of the country’s highest paid professions. In fact, San Jose and San Francisco are the two metro areas in the country with the highest risk of jobs being outsourced.
There are some stop gap measures companies have resorted to in recent years in an effort to escape cost-laden California. Since 2007, over 9,000 companies have pulled up stakes and moved their headquarters. Most have landed in Texas, an appreciably easier place in which to conduct business. But even costs in the Lone Star State have risen of late, with some of the fastest growing apartment rental rates in the country.
As for forcing the jobs to return, such notions are naïve at best, reckless at worst. Punitive tariffs will only serve to ignite trade wars as most of our trading partners are dealing with slowing economies of their own.
Consider Mexico, our third largest trading partner after China and Canada. With last year’s $236 billion of receipts in hand, Mexico ranks as our second-largest goods export market. Granted, 2015 was down 1.6 percent from the prior year, but by the same token, double 2005’s level and up nearly 500 percent since 1993, before NAFTA. As for the flip side of the equation, we imported $295 billion in goods from Mexico last year, $58 billion more than we exported resulting in a trade deficit.
Does Mexico’s benefitting “more” than the U.S. signal something is amiss? Is retaliation in order? We should hope not.
Mexico’s manufacturing sector still managed to eke out an expansion in June, but barely, coming in at the weakest since October 2013. Production fell for the first time in two-and-a-half years and exports flat-lined, which Markit conducting the survey cited as the key driver of the slowdown.
Why yes, Virginia, we do live in an inextricably interconnected world and that genie cannot be put back into her bottle. Try forcing her. Heaven knows what havoc would be unleashed.
Closer to home, markets cheered U.S. manufacturing data for June, which put in its most robust expansion in 15 months. But it wasn’t all roses. It would have been nicer to see more than seven sectors among the 18 surveyed expanding their payrolls.
But there’s more to the red flags in the report. Customer inventories are expanding for the first time in five months. Take that into account and you begin to see why employers might be hesitant about bringing on new workers – inventories up tends to signal future orders down. Indeed, orders for ‘core capital goods,’ which strip out non-defense goods excluding aircraft, have fallen for the last two months.
Validating the daunting data, Deutsche Bank (DB) posits that there’s a 60 percent probability of recession hitting the U.S. economy in the next 12 months. This is saying something as DB has been among the most sanguine on the Street on the economy’s prospects. But it appears as if even the biggest optimists cannot deny the message in the yield curve. Once it ‘inverts,’ as in shorter maturity bonds yield more than their longer-maturity brethren, it typically means the economy has hit the skids.
Where exactly do we stand? The difference between the 3-month and 10-year Treasury has halved to 110 basis points (bps), or hundredths of a percentage point, since the start of the year. The difference between the 2-year and the 10-year has cratered to 83 bps from 120 bps at the start of the year.
By DB’s estimates, if the 10-year hits 1.0 percent, we’ll pretty much be wherever