Exploring the Importance of Manufacturing to the Economy

 A while back, we posted an article on how manufacturing in the US has changed in the last 20 years.  Two major points were raised: technology replacing labor and the offshoring of production.

Efforts are underway to revitalize manufacturing in the US.  Let’s look at what the numbers demonstrate.

The Bureau of Economic Analysis, the federal government agency tasked with tracking economic data, reports a breakout of GDP by industry, among other measures.

Source: U.S. Bureau of Economic Analysis, Interactive Access to Industry Economic Accounts Data: GDP by Industry [https://apps.bea.gov/iTable/iTable.cfm?ReqID=51&step=1] (accessed June 3, 2019) (Note rounding causes the total for manufacturing to trail the sum of durable and non-durable goods in some years).

While the overall GDP rose a cumulative 35.1% between 2008 and 2018, the manufacturing industry only increased by 13.8%.  Durable goods production climbed 17.8% while non-durable goods grew at a lower rate of 9.9%.  Manufacturing now holds a declining piece of the GDP pie, falling from a 20.4% slice in 2008 to 17.1% of a much stronger GDP in 2018.

The Bureau of Labor Statistics (“BLS”) states average weekly earnings of all private workers rose a total 24.5% between 2009 and 2018.    For workers in durable goods manufacturing, the growth rate between 2009 and 2018 is a slightly lower at 22.2%.  For the nondurable sector, it is 24.0%.

The Bureau reports these all private sector workers earned an annualized $49,103 in the 12 months ended April 2019.  Durable goods workers earned a much higher annualized $61,355 while nondurable workers earned somewhat higher than the private sector at $51,971.

The Federal Reserve Bank of St. Louis shows large changes in manufacturing employment in the last several decades.  The height of manufacturing employment was reached in June 1979 with 19.553 million.  This contrasts to 12.838 million reported in April 2019, a decline of 34.3%.  The National Association of Manufacturers projects an additional 4.6 million jobs will be added in the next ten years.

Production at factories dropped at a 1.1% annualized rate in Q1 2019.  This is the first quarterly drop since Q3 2017.  It follows a 1.7% annualized increase in Q4 2018.  Motor vehicle and parts production declined 2.5% in March after increasing a similar 2.3% in February. An inventory surplus in the automobile sector lowered production requirements.  (Note such auto production fluctuations are typical).

As cited in Bloomberg’s website, the U.S. Manufacturing Purchasing Managers’ Index was 50.5 in May. A reading above 50 indicates expansion in the sector, while below points to a contraction.

Note that this decline is not unusual.  Investing.com reports these significant changes since 2010. The forecast for June calls for a rise to 52.5.

 

Source: Investing.com, U.S. Manufacturing Purchasing Managers Index,

[https://www.investing.com/economic-calendar/manufacturing-pmi-829] (accessed June 3, 2019)

The strong dollar and declining economies globally are softening international demand for US-manufactured goods.

The upshot is manufacturing remains important to the US economy.  Manufacturing employees, particularly in the nondurable goods sector, are better off than those in the private sector.

The question remains: Will changes in technology and the rise in international manufacturing result in a continuing decline to domestic operations?

1440 and the Power of Productivity

Productivity experts hold the number 1440 on a banner and wave it high.  Why?  1440 is the number of minutes in a day.

Lost wealth can be re-earned.  Lost health can be recovered.  Lost relationships can be repaired.  But time is something you can never recoup.

To achieve the most productive day, many experts put forth a variety of ideas and tools. Finding the right combination of these tools that work best for you is the challenge.

With that in mind, here are a few things to remember that can make your 1440 minutes more productive:

Meetings

Mark Cuban, a serial entrepreneur and Shark Tank investor, is quoted saying “The only way you’re going to get me for a meeting is if you’re writing me a check.”  That philosophy is simple for Mark to achieve, since he is often the one who writes the checks, but that doesn’t necessarily apply for the rest of us.

That said, here are some tips to help keep your meetings more productive:

  • Prepare and stick to the agenda – Any tangential conversation should be cut off.
  • Start on time – Don’t wait for the late arrivals, which many experts call time thieves. Seven people waiting for even ten minutes for one arrival is a waste of a combined 70 minutes.
  • End early – Attendees will feel they received a spirit-lifting bonus.
  • Consider not holding a meeting – Some attendees may agree that they are a waste of time, especially if it’s involving an issue that can be done via email.

Your Most Important Focuses

We all have goals and they often change with time.  Some may change weekly, others less frequently.  Identify your top 2-3 goals and make sure every day you focus on each.  Not only does this enhance reaching those goals, the feeling of satisfaction will energize you (no, really, it will!)

Schedule Your Time, Appropriately

We often think all time is equal.  Not so.  Many of us are more productive in the morning.  Others in the afternoon.  Identify that time period for you and use it to focus on the heavy lifting tasks.  Leave the simpler ones for other points in the day.

If helpful, use your calendar to block out time for your tasks.  Find the optimum timespan you can highly focus.  At first, you may need to experiment with the length of time you can stay highly focused.  Don’t forget to schedule breaks after those intervals.

Starting with your most important focuses, enter each activity you need to accomplish into those work breaks on your calendar and then stick to it!  If time is up and you’re still working on a task, put it aside and move on.  If you don’t, you’re cheating the system and, believe it or not, you’ll accomplish less.  Leave yourself hungry for more!

Make sure you schedule time (but not a lot) for admin work (emails, returning phone calls and the like).  Other than admin time, don’t look at email and don’t answer the phone.  Even more helpful is to shut off notifications and place your phone on silent.

Don’t schedule two meetings back-to-back.    Leave some empty slots for emergencies – both personal and business.

Some schedule their entire day, some their professional day. Find what works best for you.  For more information about this technique, you can read Cal Newport’s book Deep Work.

Delegate Like Crazy

As the driver in your business, your time is valuable.  Evaluate your tasks, both ad hoc and routine, and find someone else to do them.  Who cares if it takes them longer than it would take you? Your time is more valuable!

 

You cannot do everything; Thinking you can, actually hurts you and slows the growth of your business.  With some careful planning and diligent review, you can make sure you’re protecting your time and helping the business grow.

 

Top 10 Characteristics of an Entrepreneur

Last month, we debunked common myths about entrepreneurs. In this post, discover why entrepreneurs savor going to work while many 9-5’ers count the days to retirement.

These are 10 characteristics of entrepreneurs:

  1. Don’t Fit In

One commonly-cited reason individuals become entrepreneurs is the belief s/he does not fit in the ‘corporate’ environment.  This includes those who simply don’t like to be told what to do.  Most entrepreneurs are, at least in the beginning, hands-on and enjoy working beside the one or two employees on the floor, behind the counter, or on the phone creating sales. The term ‘corporate’ culture only defines a segment of the entrepreneurial profile.

  1. Want to Escape The “Rat Race”

Entrepreneurs want to escape the 9 to 5.  This may happen as the business progresses, but it is rarely a goal achieved immediately.  For example, my uncle opened a machining shop with the idea he could close at 4.  As a result, his business quickly failed.

  1. Possess A Strong Eagerness to Learn

Learning is key to entrepreneurs.  Though this may be a passion for many of us, entrepreneurs look at ideas and learning experiences with the view of improving their business, not just themselves.  Entrepreneurs think differently, at least when it comes to their business.  They ask “how” rather than “how not”; “why not”, instead of “why”.

  1. Are Creative By Nature

Entrepreneurs are unconventional and creative.  Matthew Toren quotes Albert Einstein in his article 6 Genuine Reasons Why People Become Entrepreneurs (Entrepreneur Magazine), which says “Logic will get you from A to B. Imagination will take you everywhere.”

  1. Prefer to Create Their Own Future

Creating their own destiny is key.  You hold the keys to your success.  True for all, critical for entrepreneurs.

  1. Choose to Pursue Their Own Passions

Entrepreneurs develop and sell products and services they love.  This takes the saying “do what you love, and the money will follow” to the ultimate degree.

  1. Desire to Be Experts

Entrepreneurs enjoy being perceived differently than others, as experts in their field.   This feeling of being appreciated is the second most important level on Maslow’s Hierarchy of Needs: prestige and feeling of accomplishment.

  1. Highly Value Flexibility

Freedom of choice in who s/he work with, including customers as well as employees.  While many entrepreneurs will state there are few customers they won’t work with, the ability to make that decision exists.

  1. Hate Dealing with Boredom

If boredom creeps in, changes can be made.  This can vary from new production techniques to a new marketing campaign to delegating certain responsibilities, but the ability to tackle a challenge whose resolution pays off is important.

  1. Aspire to be Socially Responsible

Responsibility to society is often cited as an entrepreneurial incentive.  Whether this need to make a difference is in their industry, their community or with their employees, contributing is important.

 

One other reason I read across many articles is you can never be fired.  Not true!  The inability to adapt to a changing market and the idea that one is irreplaceable are just two of the many ways in which entrepreneurs can be ‘fired’.  They stifle their business.  Though they may not be leading their business down the road to extinction, they certainly are creating a situation where cash flow and value are unoptimized.  My response is, “Why would you want to do that?”

 

Recession Survey Results

As promised, we repeated our economic survey to compare results between December 2018 and today.

 

In December, we noted:

More than a third of top economic forecasters now predict a U.S. recession in 2020.  Some pundits and politicians are predicting a recession as soon as 2019. A few say a recession’s not happening any time soon.

 

This week, it is reported by the National Association of Business Economics that three quarters of top economists predict a full-blown recession by 2021.

 

A snippet from their report reveals the following: “While only 10% of panelists expect a recession in 2019, 42% say a recession will happen in 2020, and 25% expect one in 2021. A majority of panelists also indicated they would be worried about a budget deficit in the U.S. that equaled up to 4% of gross domestic product (GDP). This is an outcome which will likely occur in 2019 given the deficit for fiscal year 2018 was 3.85%, and respondents expect spending policies to increase the deficit compared with the Congressional Budget Office’s current 10-year baseline estimate.”

 

In comparison, here’s how our poll results changed from December 2018 to March 2019:

Weighted Average Response
Question 12/2018 3/2019 Change
The Fed is raising interest rates too quickly, a recession will result 5.86 4.92 -0.94
The recent (late 2017) stock market turmoil is a strong indicator that investors are worried about a recession 6.61 5.52 -1.09
The GDP growth in the 3rd quarter 2018 rising at an annual rate of 3.5% shows a recession is far off 5.40 5.32 -0.08
With unemployment at 3.9% in October, wage growth at 3.1% over the last 12 months and the CPI rising 2.5% over the last 12 months, a recession will not occur within the next year 6.58 6.52 -0.06

 

Overall, there is a decreased expectation for a recession in the near term.  Though much of this decline is centered on the impact of both the Fed raising interest rates and of the late 2018 stock market decline, respondents appear to believe that the economy’s outlook is improving.  This contradicts the National Association of Business Economists report cited above.

 

In our March poll update, 40% of respondents believe there is not enough information available to back an opinion of whether there will be a recession or when it may occur.  However, approximately 30% of the respondents predict there will be a recession in 2020 with the balance projecting a recession in 2021.

 

Thank you for completing the poll. We appreciate your insight.

5 Entrepreneurship Myths Debunked

The information found on Kauffman Indicators of Entrepreneurship’s site: https://indicators.kauffman.org/ is quite interesting and intriguing.  It contradicts several widely-held ideas about entrepreneurship that many non-entrepreneurs hold.

Here are 5 common entrepreneurship myths that have been debunked by Ewing Marion Kauffman Foundation:

1. New Business Survival Rate

The Myth: Small businesses mostly fail in their first year of operations.

The Reality:  More than 75% of new businesses survive past their first anniversary. This rate has been surpassed since 1996. Even in the height of the last recession in 2007 to 2008, most new businesses survived.

Source: Kauffman Indicators of Entrepreneurship Survey 2017. Published January 2019

2. Startups as Employers

The Myth: Startups don’t employ workers other than the sole owner

The Reality: While the number of hires is reported as declining in recent years, in their first year, startups employ at least 4 workers. The US Small Business Administration’s Office of Advocacy in its 2018 Small Business Profile indicated that small businesses employ 47.5% of US workers.

Source: Kauffman Indicators of Entrepreneurship Survey 2017. Published January 2019

3. Who Starts Small Businesses

The Myth: The unemployed start most small business because they cannot find a job.

The Reality: Historically, over 70% of new businesses are started by opportunists, not by what Kauffman classifies as “necessity entrepreneurs.”

Source: Kauffman Indicators of Entrepreneurship Survey 2017. Published January 2019

4. The Age of Startup Entrepreneurs

The Myth: Startups are for young people.

The Reality: Those under 34 are the least active as startup entrepreneurs. The other age groups are more active. Note the following table reports the average monthly rate of startups per 100,000 people by age group.

Source: Kauffman Indicators of Entrepreneurship Survey 2017. Published January 2019

5. Entrepreneurs and Education

The Myth: Entrepreneurs hold at least an MBA.

The Realty: Entrepreneurs’ level of education is varied. College graduates are the lowest source of entrepreneurs.

Source: Kauffman Indicators of Entrepreneurship Survey 2017. Published January 2019

While the study by Ewing Marion Kauffman Foundation does not detail the ongoing success nor the type of business started, it confirms my long-held belief entrepreneurs are the type of people that pull themselves up by the bootstraps and get things done.