The myth of the U.S. manufacturing employment renaissance

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Published on Tuesday, 22 January 2013 10:57

By John Plesnicar

Recently America’s Energy Advantage was launched with the backing of Dow Chemical, Alcoa, Nucor and other U.S. companies. The goal of the organization is to limit U.S LNG exports. Their position is that employment in the manufacturing sector is currently in a “renaissance” period. Natural gas exports will increase the costs of energy and crush the current manufacturing renaissance according to the group. There has been much misinformation in print, online and television regarding all areas of the manufacturing sector in the United States. This includes the number of people working in the sector.  

America’s Energy Advantage states a figure that the U.S. has added over 500,000 manufacturing jobs since 2010. This is a correct statement. The problem with this baseline employment number is that it is taken from the worst period in U.S. history in terms of manufacturing employment. When comparisons are made to the lowest manufacturing employment month (February 2010) since the spring of 1941, any improvements will look good. 

The “added 500,000 manufacturing jobs” figure really does not tell us what we need to know in order to determine the health in employment of the manufacturing sector. What we really need to know:

1. How does 2010 (America’s Energy Advantage baseline) compare to other years? 2. How does manufacturing employment look as a percentage of the U.S. payrolls? 3. Where has the sector been in terms of total jobs and percent of the workforce?

Looking at the numbers below you can answer the above questions and we see that manufacturing jobs in the U.S. have gone from 8.876% of the total workforce to 8.964% during the “manufacturing renaissance” (2010-2012).

P: preliminary
Not Seasonally Adjusted (Chart above)

Source: BLS

Is moving from 8.876% of the workforce in manufacturing to 8.964% a “manufacturing renaissance”? In the last three years what has happened is the bleeding has stopped in terms of the loss of manufacturing jobs and percentage of the workforce. The U.S. has actually lost 564,000 manufacturing jobs since President Obama took office in 2009.

January 2009: 12,552,000 Manufacturing Jobs*
December 2012: 11,988,000(P) Manufacturing Jobs*

P: preliminary
Seasonally Adjusted*

Source: BLS

564,000 fewer manufacturing jobs today compared to when President Obama took office does not indicate that there has been a manufacturing employment renaissance.

An employment manufacturing renaissance in the United States would of course be a very good thing for the economic health of the nation. Manufacturing is a true wealth creator. There may be a manufacturing employment renaissance in the coming years, but the numbers just don’t indicate it has happened in the last three.

The United States currently does have and should continue to have an energy advantage with cheap and abundant natural gas. Unfortunately the energy advantage is being offset by other major issues in the U.S. manufacturing sector. Dow Chemical, Alcoa and Nucor have now aligned themselves with Congressman Ed Markey and Senator Ron Wyden in the LNG export debate. Both of these politicians do not promote policies which are helpful to manufacturing or the natural gas industry. More must be done to address real problems U.S. businesses face in the form of government regulation, tax policy, health care costs and tort reform. Even with the U.S. manufacturing advantage of cheap natural gas the sector will struggle to show great gains in employment until these issues are solved. 

John Plesnicar is the Managing Director of LNG Global

Comments: info@lngglobal.com

Economics over the environment in California

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Published on Wednesday, 10 October 2012 06:48

By John Plesnicar

The state of California is currently in a “crisis” with record high gasoline prices. The average price for a gallon of gas in California as of the 9th of October, 2012 was $4.67 USD per gallon. If you are reading this in Europe or Asia you probably would like to pay only $4.67 USD a gallon. In California this is considered a crisis. Elected leaders are calling for a federal investigation on the current gasoline price. This past spring I wrote an article called: No Austerity means Future U.S. Energy Policy Has Been Determined. The point of the article was that economics will drive future environmental regulations and policies. The current California situation is a perfect example where the most environmentally friendly state in the U.S. picked economics over the environment in just a few days.

California law requires refiners to produce a blend of gasoline to meet California state air quality standards based on the time of year. This means refiners and wholesalers can’t make up shortages with gasoline that can be sold in other U.S. states.  Recently California had several refinery disruptions. These disruptions caused gasoline prices in California to go up quickly as the state could not import gasoline.

This past Sunday Governor Jerry Brown asked the California’s Air Resources Board to grant an immediate waiver that would allow refineries to make and sell the winter-blend gasoline. This would ease supply issues and reduce prices. California refineries are normally not allowed to begin selling the cheaper winter blend until the end of October. What the governor did was simply bypass state environmental regulations. Economics easily trumped the environmental laws of the state. The environmental policy of California was shown to be just a piece of paper and the people will override the environmental law the instant their pocketbooks are affected.

If it is a good idea to have these winter and summer blend gasoline laws for the environment then why would the people not sacrifice a few dollars for a few more days? When the average person is directly affected economically then the environmental laws do not matter. Californians were begging their government to come up with a way for cheaper gas as soon as possible. If it meant overriding a law instead of cleaner air then that was fine with the people. This is an example where environmental laws and policy can and will change quickly if the economic conditions are putting pain on the population. The right economic conditions will always trump environmental laws.

This is just a small example but a very good one for why future U.S. energy policy has been determined. Economics will determine everything regarding future U.S. energy policy. Future laws and regulations for fracking, drilling on federal lands, total drilling permits and LNG exports in the U.S. will be based on economic survival not environmental policy. The current California experience tells us the most ardent environmentalists in the U.S. could only last a few days with economic hardship. Keep this in mind when thinking about future U.S. FERC LNG export regulations and DOE approvals.  Processes we currently think of taking years can be changed in days if the economic conditions are right.   

John Plesnicar is the Managing Director of LNG Global
Comments: info@lngglobal.com

A Question to the Oregon LNG Export Opponents.

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Published on Thursday, 04 October 2012 14:28

by John Plesnicar


What’s your plan?

From July 2000 to July 2012 the state of Oregon increased total private sector employment by only 2,300 jobs.  During that same 12 year period the population of Oregon increased by over 400,000 people. The chart below is a breakdown of the employment numbers for this time period.

Source: Oregon Employment Department.  All figures are not seasonally adjusted. 

These job numbers are shocking and sad for the people of Oregon.  The majority of the jobs created were in government and health care which require tax payer money to fund.  The majority of the jobs lost were in manufacturing and construction and these are jobs needed to pay the taxes.  This is essentially like a business adding to its overhead costs and then decreasing output.  It is a recipe for disaster and is unsustainable.

Adding to the problem is Oregon’s reputation of becoming hostile to business. In the 2012 Chief Executive.net ranking of best states to do business Oregon dropped 15 spots to the 42^nd worst state to do business.   Oregon Loses Most Over 5 Years: Drops 15 Spots Since 2008

Oregon now has an opportunity for outside investment to begin to create real wealth and private sector jobs in the state with LNG exports.  The plan from the last 12 years has been a jobs and wealth creation disaster.  Those fighting LNG export terminals and pipelines in Oregon must have a clear plan to create wealth.  This brings me back to the question for LNG export opponents in Oregon.  What is the wealth and job creation plan for Oregon if it does not include LNG exports? 

John Plesnicar is the Managing Director of LNG Global
Comments: info@lngglobal.com

Wealth Creation, LNG Exports and the iPhone 5

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Published on Monday, 01 October 2012 19:06

By John Plesnicar 

The recent release of the Apple iPhone 5 has created a buzz around the world.  U.S. television outlets send reporters to watch consumers standing in lines waiting for hours to purchase the new iPhone.  Based on a JP Morgan research note, articles have also been written on how Apple’s iPhone 5 could singlehandedly rescue the U.S. economy.

The U.S. Federal Reserve, most U.S. politicians, and even some Nobel Prize winning economists believe consuming is a way in which wealth is created.  Most Americans believe purchasing the iPhone 5 is good for the U.S. economy.

A closer look at the balance sheet for Americans tells a different story.

U.S. National Debt:

$51,000 Debt Per Person
$140,000 Debt Per Taxpayer

Personal Debt:
$50,000 Per Person

Federal Liabilities
1,000,000 Total Federal Liabilities per Taxpayer

Most Americans purchasing the iPhone 5 can’t meet and never will be able to meet their share of U.S. government debt and liabilities.  Many Americans are not able to get out of personal debt.  As an example the latest report from the U.S. Education Department states that federal student loan defaults are up from the previous two-year reporting period and almost double the rate of five years earlier. Unfortunately the thinking that consuming is good for the United States economy has taken hold as conventional wisdom.

How many of the new iPhone 5 purchases will be used to increase productivity?   For most users the new iPhone 5 will be very similar to the iPhone 4s and will be used as a toy and not a tool for increasing productivity. 

The U.S. must get excited about industries which create real wealth.  LNG exports are productive and create genuine wealth.

There are plenty of U.S. politicians, analysts, and economists who would like to restrict natural gas drilling and LNG exports.  Some of these same people are encouraging a population already deep in debt to buy the new iPhone 5 to help the US economy.  Consumption by a population already deep in debt without an increase in productivity will only lead to more debt.

The real discussion that needs to take place in the U.S. is how true wealth is created. Is it created by consuming or producing?  Producing is the only way to create true wealth.

In order to continue its high standard of living and service the current debt while fulfilling future obligations the United States must expand its economy.  The U.S. must increase productivity and begin producing products, services and natural resources the world is willing to pay for.  U.S. LNG exports are part of this solution.   

Apple is one of the most innovative and successful companies in the history of the world.  I’m using Apple as an example to illustrate consumption vs. production in the U.S and current policies.  There is no doubt U.S. consumer consumption of Apple iPhones is good for global shareholders of Apple. This U.S. consumption of Apple products is only possible though because of the current reckless monetary and fiscal policy of the United States.   

The United States is at a debt and obligations crossroad.  Policies of raising taxes and printing money are reactions to a consumption economy which is not growing. The world will not tolerate having their goods, services and investments paid back with a continuing devalued U.S. dollar.  By not quickly approving LNG export applications U.S. politicians and bureaucrats are purposefully restricting production and wealth creation.  At the same time U.S. policy encourages the consumption of iPhones.  Future U.S. policy decisions, laws, and regulations need to be focused on encouraging wealth production, not subsidizing consumption.   LNG exports are part of a real wealth creation solution for the U.S. College students buying the new iPhone 5 so they can “tweet” or Facebook friends with news on what they ate for lunch is not.

John Plesnicar is the Managing Director of LNG Global
Comments: info@lngglobal.com