Funny thing hap­pen­ing in this eco­nomic fore­cast

The Oklahoman - - OPINION -

PRE­DIC­TIONS re­gard­ing long-term eco­nomic trends are about as re­li­able as a 10-day win­ter weather fore­cast in Oklahoma: It may snow. It may not. It may snow a lot. It may not.

In the 1950s, a ge­ol­o­gist for Royal Dutch Shell pre­dicted U.S. oil pro­duc­tion would peak in the 1970s and the world would phys­i­cally run out of oil. In 2018, the United States is poised to be­come the world’s top oil-pro­duc­ing na­tion (it’s been the top nat­u­ral gas pro­ducer since 2009). Mean­time, North Amer­i­can oil re­serves ap­pear boun­ti­ful.

Eco­nomic trends an­a­lyst Mark P. Mills re­cently noted an­other mar­ket pre­dic­tion that could prove as flaky as the snow that may or may not fall in Oklahoma. The fore­cast Mills men­tioned is that man­u­fac­tur­ing em­ploy­ment will take the same track as farm work and be­come a neg­li­gi­ble share of the U.S. work­force.

Seems log­i­cal. Man­u­fac­tur­ing jobs have been mov­ing out of the coun­try for decades. Ro­bots have re­placed hu­mans in fac­to­ries, just as ad­vances in agri­cul­ture tech­nol­ogy re­duced the need for work­ers.

But a funny thing is hap­pen­ing. Last year, U.S. man­u­fac­tur­ing em­ploy­ment gained 196,000 jobs, the best show­ing since 2014. In De­cem­ber, 12.5 mil­lion Amer­i­cans were en­gaged in man­u­fac­tur­ing. Man­u­fac­tur­ing is growing at a faster pace than the rest of the econ­omy.

What’s most im­por­tant about this trend is that man­u­fac­tur­ing jobs pay, on av­er­age, more than $900 a week, com­pared with $757 for the pri­vate sec­tor as a whole.

Mills cites Bureau of La­bor Sta­tis­tics show­ing that dur­ing the past 12 months, in­dus­trial-sec­tor jobs (which in­cludes min­ing and thus oil and gas ex­trac­tion) grew at twice the rate of the health care sec­tor. Mean­while, IT, retail, leisure, trans­porta­tion and gov­ern­ment saw lit­tle net job cre­ation.

What’s go­ing on? Farm job de­clines are per­haps eas­ier to un­der­stand; thus, long-term trend pro­jec­tions are eas­ier to make. Af­ter all, food con­sump­tion can grow only by an amount re­lated to pop­u­la­tion growth.

On the other hand, there’s no pre­dictable limit to the de­mand for man­u­fac­tured goods. Con­sumers the world over are hun­gry for prod­ucts that are ei­ther new to the mar­ket or avail­able to re­place what they al­ready have.

Of course, the United States will get only a piece of fac­tory job growth. Pres­i­dent Trump is de­ter­mined to se­cure a larger piece, but his trade pol­icy may hurt the ef­fort. Why? The lead­ing source of fac­tory job growth is in the fab­ri­cated met­als sub-sec­tor and that sec­tor is af­fected by the cost of steel, which in turn is af­fected by pro­tec­tive trade pol­icy.

A sober­ing coun­ter­point to re­cent in­dus­trial-sec­tor jobs growth is that the 12.5 mil­lion Amer­i­cans work­ing in fac­tory jobs in De­cem­ber of 2017 com­pares with 13.7 mil­lion in De­cem­ber of 2007. Just six years ear­lier, the fig­ure was 17 mil­lion.

Still, pre­dic­tions of the near ex­tinc­tion of U.S. fac­tory jobs have been greatly ex­ag­ger­ated. Mills, a se­nior fel­low at the Man­hat­tan In­sti­tute, says the ar­gu­ment that man­u­fac­tur­ing em­ploy­ment will go the way of farm jobs is “wildly over­stated.”

It’s safe to pre­dict the ab­sence of snow in Oklahoma in June. Eco­nomic trend pre­dic­tions are nowhere near as re­li­able.

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