According to studies compiled by Markit Economics, U.S. manufacturing is down for the months of August and September. The recent news of Brexit and the fact that China has reached a slump in their economy is causing slower manufacturing and spending around the world. The U.S. is only at a two percent growth rate for the year.
Minimum wage earnings are down for Americans compared with where they were about fifteen years ago, and the hiring trends by companies have also slowed. If Americans can’t spend, the economy can’t grow.
Economists have estimated that the average age that it takes to double the standard of living for the average American is now up to about seventy years. This inability to change one’s circumstances within a short amount of time has led to the baby boomers not having enough to retire on, so a lot of them go back to work. However, due to their age, they are usually stuck in dead end jobs that pay very little.
Young people who would ordinarily be graduating college, then landing that first job, buying that first home, and starting their family, are now moving back into their parents’ basements in droves. If they are lucky enough to land a great job, they are not getting great offers that the grads of twenty years ago did. In addition, the Federal Reserve is starting to increase interest rates, which makes it harder to purchase homes and automobiles.
There are several things in development here in the U.S. that are also causing our economy to be sluggish in growth. It doesn’t help that the unrest and attacks overseas have caused Americans to think twice or pause for longer periods of time before booking long awaited vacations to foreign countries. So the travel and tourism industries are suffering. In turn, those countries that might ordinarily have great products or services to export, may be suffering from a lack of workers and facilities because of war and civil unrest.
It also doesn’t help that we are all waiting on the results of the Presidential Election. The fiscal policies, public investment and structural reform that the new President will put into place will greatly affect our economy and cause ripple effects around the world.
The U.S. manufacturing companies are watching all of this unfold around them. With the advancement of the ease of deliveries, many Americans are using their purchasing power to order from overseas companies who are marketing cheap products and sometimes lesser quality to Americans who want to get the most for their dollar.
This in turn affects local suppliers who have slowed in their production times because the orders are not coming in. Many of them prefer to make items in bulk quantities, so they are hesitant to fire up the assembly lines and employ workers who many not have much to work on. The U.S. manufacturers are also hesitant to have a lot of inventory laying around, especially those who work in food services, because they know there is a shelf life to their product. They don’t want to have it still sitting in their warehouse when it’s close to expiration.
The U.S. dollar is strong right now too, and even though some countries are catering to Americans, others can’t afford to. This lessens the global demand for U.S. goods and services. However, it is estimated that nearly half of all U.S exports go to countries that we have free trade agreements with. Also, when the U.S. plants do fire up their assembly lines, it is estimated that they use about thirty percent of the nation’s energy supply in order to run their operation. So, that is good for the energy industry.
No one knows what the answer is to get the world economy moving again. Several theories have been tried and discarded. The only thing that seems to make sense is for industry leaders to invest in better training for their employees, study the competition abroad, increase funding for STEM related fields, and find ways to make great products at affordable prices.