Tuesday, August 20, 2013

Some Good News

The Boston Consulting Group just released a report titled The US as One of the Developed World's Lowest Cost Manufacturers, predicting a major uptick in manufacturing employment, leading to 2.5 to 5.0 million new jobs by the end of the decade, causing a 2-3% drop in the unemployment rate. This is really good news. Let's take a look:

 China will still be slightly lower cost, but the US will be significantly better positioned than Germany, France, Italy, the UK or Japan. Labor costs, adjusted for productivity, and lower energy costs, sparked primarily by the shale gas revolution, account for the bulk of the US advantage. Take a look at labor cost comparisons:

When was the last time you had the thought that the US was a low-cost manufacturing source? For me, it's been a long while! A key contributor is plentiful new shale gas:

The US has a HUGE advantage in natural gas source pricing, and through this, a large advantage in electricity costs. The combination of efficient, low cost labor and a huge energy cost advantage will lead over time to a very large number of new jobs. So far, not much has happened. BCG estimates this new employment trend will kick into gear in 2015:

Energy production and refining, chemicals, metals, and certain machinery manufacturing will be the industry categories most positively affected.

This is good news for all of us. Manufacturing growth; all activities associated with energy, including big new investments in LNG exports; healthcare reform, where the ACA will put new money into the health of our workforce, and healthcare cost control will become a job driver; and immigration reform, which will unleash enormous new energies and resources in our economy (and will, I predict, happen in 2015) - this is the combination of positives that will move our economy into high gear in 2015-2016.

I find this very exciting and heartening!

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