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What's Driving The Economy--Manufacturing

Every morning with breakfast, I scan a few hundred news feeds on my iPad (I use the Reeder app which links to Google Reader).

Aw 11034 Mfg Chart Blogget

One of my favorites is Business Insider. Last week Joe Weisenthal wrote Every Serious Person Needs To See This Chart On What's Really Driving The Economy.

Some very smart and serious thinkers have been spreading a gospel of doom and gloom about automation and jobs. They see how we can automate so many jobs that they fear a future where machines do everything and there will be no jobs for humans. This will lead to huge social unrest, revolutions, anarchy, and so on.

Actually, most of the time we automate jobs that are either non-value-adding or unsafe for humans. Those companies that over-automated in the 80s and 90s have discovered that humans add value and that automation needs to be implemented a little more judiciously.

So here's an article by a writer on the economy that has some interesting clues for those of us in manufacturing. There's a surprise at the punchline.

You might not be familiar with it, but "Very Serious People" is a popular slur on the internet to describe a certain brand of politician, economist, and pundit who talk about the need for bold steps and sweeping structural reforms to deal with problems like the deficit, America's lack of competitiveness, and the need to build a retooled, highly educated workforce prepared for the high-tech challenges of the 21st century.

In the eyes of the "Very Serious People," If you propose something so crude as just spending a lot of money to put people to work, but don't also propose some long-term deficit "solution," then, well, you're just not being serious.

Anyway, one of the fundamental beliefs of this set of folks is that unemployment is the result of some fundamental (mostly technological) change to the economy. Gone are the old days of working in a store or in a factory or hammering nails to build a house. All that collapsed, and the industries of the future (like building apps for phones or sifting through piles of Big Data) aren't open to the workers of the pre-2008 world. And so therefore, they say, it's crude and silly to think that mere fiscal stimulus can do anything but put a temporary "band aid" on the problem.

But there's a problem with this view, which is that it doesn't accurately describe the economy at all.

Karl Smith at Modeled Behavior posted this brilliant chart the other day.

The blue line is the shipment of technological manufactured goods. The red line is the shipment of metals for the durable goods industry.

One of the lines has been surging since the recovery, and it isn't the tech one. It's the major old economy one.

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