The Wall Street Journal reports that American companies are on the verge of bringing home a record number of jobs from abroad
American companies are on track to relocate, or return to the United States, nearly 350,000 jobs this year, according to a report due Friday from the Reshoring Initiative. It would be the highest number on record since the group began tracking data in 2010. The Relocation Initiative is pushing to bring manufacturing jobs back to the United States.
Over the past month, dozens of companies have announced plans to build new factories or launch new manufacturing projects in the United States. Idaho-based Micron Technology Inc. announced a $40 billion expansion of its current headquarters and investments in memory manufacturing. Ascend Elements said it would build a billion-dollar lithium-ion battery materials plant in Kentucky. South Korean conglomerate SK Group said it would invest $22 billion in a new packaging plant, electric vehicle charging systems and hydrogen production in Kentucky and Tennessee.
“We think this will be a long-term trend,” said Jill Carey Hall, U.S. equity strategist at Bank of America Corp. “Before Covid there was… a little uptick, but obviously Covid was a big trend and you saw a continued big jump this year.
To be sure, globalization has been a tailwind for investors and big business for much of the last 30 years, especially American companies. The increase in cross-border trade boosted profits and productivity and allowed countries to focus on the goods and services they were best equipped to produce. Globalization has also provided multinational companies with new customers and new pools of cheap labor.
However, the vast change might not be an outright victory for American blue collar workers. The increase in capital spending suggests that many companies may be looking to replace foreign workers with technology rather than U.S.-based workers, according to Bank of America. Capital expenditures are often investments in equipment or technology that automates worker tasks.
“There’s no doubt that companies, when they bring back jobs, know they’re going to pay three to five times more for labor,” said Harry Moser, founder and chairman of the Reshoring Initiative. “Therefore, they have to automate.”
North American companies ordered a record 11,595 robots, worth $646 million, in the first quarter, setting 2022 on pace to surpass last year’s record numbers, according to the Association for Advancing Automation.
Manufacturing employment from 1939 to today
US manufacturing employment appears to have hit a secular low of 11.423 million during the Covid pandemic, barely surpassing the 2010 low of 11.453 million.
Manufacturing employment 2019-present
Manufacturing employment is now above pre-pandemic levels.
Manufacturing openings peaked at over one million in April 2022. They fell to 790,000 in July 2002.
End of globalization
Globalization is on the decline. The positive side is the jobs. The negative side is inflation and pressure on corporate earnings.
The Fed no longer has the wind of globalization at its back, which is driving prices down. It has the inflationary aspects of globalization blowing violently in its face.
This is another reason not to expect the Fed to come to the rescue soon with QE and lower rates.
Also consider de-globalization: new supply chains are inefficient and will drive up inflation
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What about jobs?
- The Covid recession was very short, two months, not even a full quarter of declining growth. The pandemic has also been accompanied by the biggest job losses in history.
- I expect the opposite of the Covid recession: a long period of weak growth accompanied by relatively high unemployment figures.
Housing will lead the next recession (one that I think has already started).
But the end of globalization is another reason to expect a minimal rise in unemployment.
Cyclical components of GDP, the most important graph of the macro
If you missed it, please note Cyclical Components of GDP, the most important macro chart
My follow-up article was A Big Housing Bust is the Key to Understanding This Recession
Housing drives recessions and recoveries and housing rates stay low for a long time.
Add it all up and you have the opposite of the Covid recession, a long period of economic weakness with a minimal increase in unemployment.
Expect a long period of low growth
For more, please see Expect a long period of weak growth, whether or not it’s a labeled recession.
It doesn’t matter whether you call it a recession or not. But expect very weak growth, an inflation-restrained Fed, and therefore weak corporate earnings as well.
This post is from MishTalk.Com
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