The following is a paper submitted by the author on November 7, 2012 for a class assignment in an economics course. The author is currently pursuing a master of science in management degree from Cardinal Stritch University in Milwaukee.
Abstract
This student examines, from an economic point of view, the current thoughts and worries of U.S. manufacturers, particularly those in the states of Wisconsin and Illinois, and makes predictions for the manufacturing sector in the coming months.
Introduction
Recently, U.S. manufacturers have shown extreme caution in making key decisions, for a variety of reasons. Decisions have been held off or outright scrapped on things like new hiring, expansions, capital investments, and so on. In the following paper, this student will examine an article that reflects the worries of manufacturers in the states of Wisconsin and Illinois, specifically the southeastern portion of the former, and the northern part of the latter. The data used in the article is from October 2012.
The Article
An article written by Milwaukee Journal Sentinel reporter Rick Barrett, entitled, “Region’s manufacturing weakens,” and published on November 1, 2012, serves as the foundation for the following economic analysis. The article cites October 2012 figures by Marquette University’s Center for Supply Chain Management and the Milwaukee chapter of the Institute of Supply Management showing that manufacturers in southeastern Wisconsin and northern Illinois are cautious right now on a variety of key moves and decisions. The two institutions collaborate to compile the data monthly, publishing it in the form of a survey index. Any score above 50, according to the index, signals growth for that category, while a score below that threshold demonstrates decline in that area (Barrett, 2012).
Areas of concern that were looked at, according to the article, include [overall] industrial health, [overall] employment, blue-collar employment, white-collar employment, new orders, production measure, exports, and order backlogs. Each of these categories saw declines in score from the previous month, September 2012 (Barrett, 2012). The article cites the report as blaming this decline on both the broader downward spiral in the global economy, and, here at home, uncertainty in the political realm, as upcoming elections, which have since passed, were a source of anxiety. Hurricane Sandy is discussed, as well, with the article warning of the short-term economic consequences of the storm’s effects, but also leaving room for hope in a broader, long-term recovery.
Analysis
It will be interesting to see which way manufacturing trends in the coming months. This student is betting that manufacturing will see gains in the near future. With the elections now over, companies in all industries no longer have the convenient excuse at their disposal to hold off on capital and workforce investments until they find out which direction government, both at the federal and state levels, will go. Additionally, there is the strong potential for economic growth and opportunity as a result of the aftermath left by Hurricane/Superstorm Sandy on the east coast.
As the article points out, there is no doubt that there will be short-term economic ramifications as a result of the storm. This is a given. Countless residents are without homes; businesses of all kinds, as with homes, were damaged or outright destroyed; and infrastructure, including roads, power lines, and public transportation, took serious hits. Economic activity, for all practical purposes, has temporarily ceased:
Hurricane Sandy could have a negative effect on manufacturing as retail sales are temporarily slowed, electricity is out, and there’s damage to ports, railways, airports and roads. Some companies have temporarily closed factories until things are sorted out, resulting in a loss in productivity (Barrett, 2012).However, despite this grim reality, there is hope from an economic standpoint. There will be a need to replace lost and damaged goods, buildings, vehicles, equipment, components, and infrastructure, and this fact creates significant opportunity for manufacturers and the construction industry, in particular, the article goes on to note. It has been said by many that crisis breeds opportunity – this storm, then, from a purely rational economic viewpoint, all emotions and thoughts on the human element of the storm in check, may be what the U.S. needs in order to prompt economic activity from a variety of directions: employers hiring, consumers and businesses buying, individuals making the plunge into entrepreneurship, and so on. Such a thought – such a fact – is not new. Many economists, historians, and government officials contend that it was the entry of the U.S. into World War II that finally pulled the country out of The Great Depression, led by manufacturing. So, to sum up, this student is confident that manufacturing will start to see gains in the coming months, largely as a result of the storm.
Beyond the storm’s effects on economic activity, however, there is also this notion of “pent-up demand” that has often come up in policy discussions and debates these last few years, in which consumers and businesses have been holding off on new big-ticket purchases for so long due to “The Great Recession,” that it cannot be much longer until replacement becomes necessary. Consumers and businesses have been looking to maximize the lives of just about anything and everything they can, ranging from vehicles to roofs and siding, and from electronics to appliances and tools, with many goods in between. Replacement of these items is inevitable. Finally, there is the simple fact that the economic data analyzed in the article is compiled monthly – the reports cited in the article should not be interpreted to represent long-term economic health.
Conclusions
In light of Superstorm Sandy, along with pent-up demand by both businesses and consumers caused by The Great Recession, and the fact that the U.S. elections have now passed, this student sees great opportunity for the manufacturing sector in the coming months, benefits that will naturally spill over into the construction industry, as well. There will be a need to replace an extensive variety of both components and finished goods as a result of both the storm’s aftermath and consumers’ eagerness to buy. It is simply inevitable. These factors will also assist companies in more easily making the key decisions that they have been placing on the back burner for some time.
References
Barrett, R. (2012, November 1). Region’s manufacturing weakens. Milwaukee Journal Sentinel, Business pp. 1, 4.
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