Be optimistic: Boom could be ahead for U.S. manufacturers

How bullish are you about your company in 2015? Jay Lehr, Ph.D., senior fellow and science director of The Heartland Institute says, “It pays to be an optimist.”

Lehr was in Waukesha recently to speak to ITU AbsorbTech’s national sales team. ITU offers a proprietary line of products that eliminate oil laden absorbent waste from manufacturing customer’s waste streams. After reviewing 55 data points, Lehr’s conclusion is that manufacturing has not only rebounded from the Great Recession, but is positioned to grow at a rate beyond what the U.S. has ever experienced.

His conclusion follows intense research scrutinizing a broad range of economic factors. Let’s examine some of his findings:

  • Over the past two years, the U.S. trade deficit has narrowed more than 20 percent as exports increased and imported oil declined.
  • Household debt is consistent with 2003 levels.
  • Household wealth was up $1.3 trillion in the second quarter of 2013 (the 7th straight quarter increase).
  • Total household wealth (what people own minus their debt) is at $74.8 trillion – an all-time high.
  • Corporate debt is below pre-housing bubble levels.
  • Banks are making loans at record levels.
  • U.S. per capita economic output is now at pre-recession levels.
  • Debt to GDP shifted from 170 percent down to 120 percent.
  • The U.S. budget deficit has declined as tax receipts increased and spending declined.

“The U.S. economy is resilient,” Lehr says, “Recent issues with Syria and the governmental shutdown didn’t shake the stock market. This reflects the level of optimism that people are feeling.”

While many media pundits bemoan the 2.8 percent growth that the U.S. economy is experiencing, Lehr’s position is that slow and steady growth signals a stable and healthy economy.

One of the most unusual indicators on Lehr’s economic list is the Keeneland Race Horse Auction. The event takes place in Lexington, Ky., and is the biggest racehorse auction in the world. “This is an important data point,” Lehr says, “because it represents discretionary dollars.” Over the many years that he’s been analyzing data, the results at Keeneland are predictable. “This year, record amounts of money changed hands. If you consider that there is a two-year lag before the economy catches up, 2015 is going to be a boom year!”

Another surprising fact is that the United States is now the world’s largest producer of combined oil and natural gas (Saudi Arabia and Russia ARE justifiably concerned!). “It’s cheaper for companies outside of the U.S. to set up facilities in the U.S. because the cost of energy is much less and labor costs overseas are rising,” says Lehr. Labor costs in the U.S. are currently 18 percent lower than Japan and 35 percent lower than France or Germany. He predicts U.S. manufacturers to take $70 to $115 billion in sales from other exporting countries in the coming years. Re-shoring jobs that left the U.S. over the past two decades will come back, generating an estimated 5 million new jobs.

While there is a great deal of concern worldwide about China’s growing power, Lehr’s recent visit to the country tells another story. “China is experiencing serious defaults on bank loans. Environmental laws are becoming more stringent, which is causing increased pressure on businesses to make costly eco-friendly machinery investments. Wages are increasing, which will curtail growth, and their population is aging. The one child per family law is creating a worker shortage that is expected to last at least another 20 years.”

The situation is equally bad with the European Union. All major European countries are virtually bankrupt. While the unemployment rate in the United States. is at 7.2 percent, Europe is at 12 percent and the youth number is at 24 percent.

The good news is that U.S. manufacturers are scheduled to invest $110 billion in this decade, starting in 2015, so the demand for talent will continue. Kent Lorenz, Midwest president of Ellison Technologies Inc., is actively involved in the Schools-to-Skills initiative (http://www.dreamitdoitwi.com). The objective is to help students understand the value of a manufacturing career. Through the program, high school students visit different manufacturing companies and are amazed, especially with the level of automation.

“After seeing first-hand what it’s like to work in a manufacturing environment, students and teachers alike are both stunned and shocked by the highly skilled technical positions – these provide a great quality of life,” Lorenz said.

Waukesha County Technical College’s Center for Business Performance Solutions’ Dean, Joe Weitzer, Ph.D. has seen an uptick as manufacturing companies are back to re-investing in their employees.

“Four years ago, our Six Sigma and Project Management classes were less than half full,” he said. “Today, as manufacturing companies upgrade their talent, the demand for courses continues to expand and many are running at capacity. What’s exciting, is that manufacturing companies are investing in leadership development. They’re preparing for the future. Our new leadership program, which launched in September, sold out almost immediately.”

It’s easy to get emotionally side-swiped by the constant barrage of negative messages that the news media presents as relevant data points. Fortunately, more and more people are shutting off their TVs and instead, listening to their customers and their employees.

ITU AbsorbTech president Jim Leef says, “I do believe that human beings have an incredible ability to figure things out. Companies that harness that ability, get people to collaborate and come up with their own solutions. American companies have a long history of succeeding; we do it better than any society. While there are plenty of obstacles and struggles, including those created by our government, American companies are poised to excel.”

History has proven that Americans are wildly resilient and industrious. There is great momentum in play, and as companies continue to adapt and forge forward, according to Lehr, “The best is yet to come!”

Christine McMahon is a business strategist. She can be reached at (414) 290-3344 or by email at: ccm@christinemcmahon.com.

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