Green Shoots in Manufacturing
Manufacturing jobs are coming home, with green shoots sprouting even before Trump's big tariffs.
Will America's Rust Belt be replaced by charming downtowns with quirky antique shops.
The end of Biden’s “Manufacturing Recession”
Lost in the tariff chaos were two key jobs reports that came out showing a boom in jobs under Trump.
On April 4th the Bureau of Labor Statistics released monthly numbers saying 228,000 jobs were created in March -- up 70,000 on the previous month.
Even better, the ADP employment report -- which excludes government workers -- said the economy added 155,000 private jobs in March, almost double the previous month's tally of 84,000.
What was most interesting in ADP was manufacturing jobs, which jumped for the first time in 2 years.
This puts manufacturing job gains since Trump took office around 35,000 in 2 months. Which isn't world-changing, but compare to 150,000 manufacturing job lost in the last two years of Biden.
The Tariff Race Against Time
Green shoots matter because Trump just set off a race against time with tariffs, with domestic manufacturing getting hit for lack of cheap Chinese components even as tariffs themselves encourage domestic production.
The problem in the near-terms is you lose faster than you create. For the simple reason it takes years to start new factories -- you have to line up the money, choose the location and build the factories -- with environmental permits.
Only then do you hire hundreds of people, work out the suppliers and distribution to get it on the shelf at Walmart.
Indeed, we saw this in horrible survey data in manufacturing this week from the Philly Fed, as well as weak industrial output numbers.
So with tariffs it gets *worse before it gets better.
Now, some manufacturing can be stood up faster than others. Textiles -- clothes, bedsheets, MyPillows -- can be done in a year.
Electronic assembly or food processing might take closer to two years. Car parts and chemicals is more like three.
Pharmaceuticals or aerospace can take 4 years. And semiconductors, a big part of our deficit, can take more than 5 years from scratch.
Granted you can go faster -- Elon stood up his Austin gigafactory in just 13 months, but planning took years. And most companies aren't Elon.
This means that tariffs cannot immediately re-industrialize -- physics does not permit it. Nor do HR departments, licenses, or Walmart buying agents.
At best you get expansion of existing American factories. Which can only handle so many products -- they don't have the machines, the talent, or the distribution to immediately re-tool from, say, drill bits to stuffed animals.
What Re-Industrialization Needs
This all means re-industrialization will be a long process.
And it won't even begin until 3 things happen:
First, stability in tariffs -- you don't built factories if Trump's gonna change his mind tomorrow.
Second, cutting red tape -- especially environmental rules on manufacturing that add tens of thousands in cost per worker. The National Association of Manufacturers estimates red tape costs small manufacturers $50,100 per year per worker. That’s literally more than salaries, and about 2/3 of it is environmental mandates.
And number three: cutting taxes, fees, and permits on manufacturing, especially small outfits to help them get of the ground.
What’s Next
Trump and Elon are doing their best on every front, cutting useless rules and trying to lower government spending. While Congress, of course, drags its feet.
Until that changes, we may not get much more than green shoots while Americans could be looking at paying tariffs for imported goods for a very long time.
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So how do we get Congress to get with the program? They are our elected trustees and care failing in that assignment. How can we get rid of lobbyists, etc..? I truly pray that DOGE will start investigating each and every person in Congress as well as their staff. Too much corruption and treason.
Having spent my career in the semiconductor industry, there is precisely ZERO chance of reshoring the industry. Semis depend on high volumes and tight supply chains which are not achievable selling into just the US market. Not to mention the complete lack of an intelligent and hardworking workforce. Even TSMC in Arizona had to ship in Taiwanese workers because the dumb & lazy Americans couldn't do the job. Tariffs are not about reshoring industry.