Category Archives: Technology

The California Drought and Inequality: So What’s New?

There was once water here

There was once water here

At first blush, the California Drought and Inequality are not intimately related. Yes, some class warfare has broken out around water usage and new conservation rules.   But that’s not what the title of the blog post is about.  What do the California Drought and Economic Inequality in the U.S. have in common?  The answer is: Neither are nearly as unique or exceptional, as we’re prone to think, because of our blinders and narrow perspectives.  In the great span of geologic time and economic history, each problem, in it’s own realm,  is more the norm, than the exception; more typical than unusual,  It’s important to know this, because, as the adage goes, you must know your enemy to defeat him.

On the Economic Inequality side, it is gradually sinking-in that the period of (relative) equality during the roughly 40 years after World War II, is an historical anomaly for the U.S; an exceptional era, when stars were aligned to create a large middle class that included a large swathe of the “working class.”

On the Drought side, you may be very surprised to learn that the period of explosive growth in Southern California (and the rest of the Southwest) — the 1970s, 80s, and 90s — occurred during the wettest decades in the last two millennia.  Yes, that’s 2000 years, or back to “ancient times.”  That’s not at all exaggerated. Scientists at the U. of Arizona and Columbia U. have built a remarkable hydrology data base dating back to ancient times, which says that the areas we know as California and the U,S. Southwest experienced numerous droughts in the past, more severe than the current one, lasting decades, not just a few years. Read about it and listen to a riveting discussion here.  If you want more technical (and cool) information, try this and this.

Thus, water conditions in Southern California (and most of the Southwest) over the last 15 years would have been considered normal, neither unprecedented nor dire, centuries ago. The situation today is dire” only because we built civilizations where nature may not have intended.  And the technology and ingenuity to overcome nature, may have reached its limits. The situation is real bad.  Here are some amazing photographs of today’s California Dust Bowl.  These are not shown much outside California, because the disaster is proceeding too slowly for the appetites of cable and network news.

Don’t hold your breath or bet on California pistachios while waiting for cheap Mega Desalinization, though MIT is trying hard to overcome the expense and impracticalities of using sea water for drinking and irrigation.  Stay tuned.  Another avenue of hope are the amazing Israeli desalinization efforts, to the point where Israel now has more water than it can use.

In terms of the economy, the several decades from the end of World War II, through the late 1970s, which liberals view as a model for compassionate capitalism, is glaringly atypical in American history, at least back to about 1910.  Piketty & Saez, have documented that, to the satisfaction of most mainstream economists.  You can find all of that data if you start from here.  There is some evidence that Inequality was also the general rule in the U.S. for most of the 19th century, but that is much harder to confirm.

The precise conditions making it possible for wider prosperity in the decades following WW II were never sustainable; some of the factors we don’t want repeated.  The special circumstances include the Great Depression, which ushered in New Deal regulatory, tax, and labor reforms; the economic boost from World War II, the mother of all stimulus packages; and America’s emergence from the Great War as the only intact industrial economy in the world.

The best advice to Drought warriors: Start looking at the Drought as something that doesn’t just end in a few years. The best counsel for Inequality warriors: Stop looking at Inequality as something that will correct itself as soon as job growth accelerates and labor markets tighten.

One difference between the California (Southwest) Drought and Economic Inequality is that lack of water in the Region is natural (going back at least two millennia); while Inequality (arguably) is not natural, not an inevitable result of capitalism, globalization, or human DNA. The leading academic behind the view that Inequality is man made, and can be lessened considerably, with the right policies, and to the betterment of all, is Joseph Stiglitz. He’s a capitalist of the Roosevelt variety (both Teddy and FDR). He’s not a communist.

Am sure you are asking whether human caused global warming is contributing to the Great Drought, which would mean it’s not totally natural. In fact, most mainstream climate scientists believe global warming caused by humans, is exacerbating the current Drought; making it worse than it would otherwise be. You can read about some of that here and here.

Whether or not you believe the Drought or Inequality is a return to a natural state of affairs, it appears there is more hope for rebuilding the U.S. middle class, than for preserving the California life style, as we’ve known it.  There may be other good reasons for not preserving all of it.

After the U.S. middle class has been rehabilitated, they may not be flocking in such large numbers to California, Arizona, Oklahoma, and Texas anymore.  If the Great Drought had happened sooner, the Dodgers might still be in Brooklyn.

An Encryption Angle on the Clinton E-Mail Affair

An Encrypted Message?

An Encrypted Message?

Hillary Clinton’s problem with her e-mails are raising questions about judgment, honesty, and the security of her communications while Secretary of State. I’ll leave it for others to decide whether this is just a “bunch of hooey,” in a long string of ferocious “anti Clinton propaganda,” as Clinton ally and confidant, James Carville says; or if it has real substance. Regardless, all of this is now fare for the “Road to the White House, ” and puts Benghazi issues on the first page of Google searches again.

For the nerd writing this blog, the most important questions raised by Clinton E-mail Gate are around the security of electronic transmissions (generally); and especially the role and potential of Encryption, or lack thereof. (Here is a good sketch of how Encryption works).

These questions are the same, now all-too-familiar ones, raised in the NSA/Snowden affair; British intelligence agency (GCHQ) spying on news organizations; and the hacking of Sony, which almost brought that company to its knees, while making public some very embarrassing e-mails by it’s executives.

One of the first questions that should have been asked about Hillary’s private server and e-mail system, was whether her technicians used any form of Encryption, at least for e-mails in transit.  The only answer that has surfaced so far comes from a Bloomberg News report that hasn’t received much attention.  It says that Mrs. Clinton’s email-server had a “mis-configured encryption system.”

It’s not clear exactly what that means, other than her tech consultants tried installing some form of routine encryption, but botched the job. According to the Bloomberg story, “although Clinton worked hard to secure the private system, her consultants appear to have set it up with a misconfigured encryption system, something that left it vulnerable to hacking…..”

Further research reveals that building a robust, easy to use, universal, turnkey, Encryption system for all e-mail, is a lot harder than most of us realize; logistically, more than technically, if you can separate the two.

Years after British journalists were spied on by their government’s intelligence agency, The Guardian found that news organizations like the Associated Press, Le Monde, LA Times, CBS News, Forbes, Baltimore Sun, and Der Spiegel were still lax in protecting journalists and their sources from surveillance; still putting all of the people who communicate with them at risk of being spied on.

You’d think today’s tech geniuses could find a way to help us all routinely and robustly Encrypt our e-mail. But, as “Digital Trend’s,” Geoff Duncan put it: “the bottom line is that email as we know it today has never been secure, and the myriad ways we send, receive, store, and use email messages makes fully securing email a very difficult problem; at best.” This,  from an established tech company specializing in personal and custom networks and servers, like, perhaps, the consultants Hillary used.

Even many among us fixated on privacy have second thoughts about strong Encryption when they learn what it may really mean. Not only is it tedious and arduous to get there, but it’s questionable whether you could ever search your own e-mails (easily,  if at all) if they were encrypted on Google servers. That’s both good and bad. The best (and relatively understandable) explanation I’ve found as to why this is so difficult, can be found here.

Actually, the big e-mail providers, like Google, Yahoo, Apple and Microsoft appear to be closing in on this Holy Grail.  But, one formidable obstacle is U.S. Government security agencies, which are very worried about throwing away the Encryption key, so that no one except the users in the sender-receiver diad can ever decipher the message. That of course is really the whole point of strong Encryption.  But it would mean that NSA, for example, or it’s British counterpart, couldn’t decipher messages between terrorists planning an assault on a world cup soccer game.

Here is one vivid and very recent story about obstacles Google encountered offering user selectable Encryption for their customers.

Darrell Issa’s investigators would also be frustrated if a strong form of Encryption prevented them from finding out what Hillary might have written to the White House as the tragic Benghazi events unfolded?  She may not have written anything; if she did, it likely wound up on a (relatively) secure State Department server; or on a server (like at the White House’s or CIA’s) which may claim the Issa Committee is not entitled to see it.  The treacherous road to the White House!

If You’re Worried About “Dynamic Scoring,” Ditch the “Voo-Doo Economics” Argument

dbl pk sun set455a copyFor those of us who think Dynamic Scoring (DS) is a really irresponsible, fiscally dangerous way for the Congressional Budget Office (CBO) to estimate the impact of changes to the tax code, ditch the politically charged “Voo-Doo Economics” (VDE) argument.

Bi- and Non-Partisan, deep skepticism about DS was around long before “Voo-Doo Economics” became a charming epitaph used by liberals to attack conservative economics. Ditch that language. It’s not strictly applicable to DS and will shut down debate even before it starts.

Some recent coverage of the effort by Paul Ryan and House Congressional Republicans to enshrine the practice of DS,  is not especially helpful.  It slips into partisan sounding insult mode, though that may not be the Washington Post’s intent.

DS and VDE are (somewhat) related. Both presume that cutting taxes results in people and businesses spending more, creating more economic activity,  which, in turn, produces more (new) revenue.  There is of course some truth to that.  But with lots of caveats, cautions, and qualifications.

The difference between DS and VDE is that VDE refers to a world view, an all encompassing philosophy about macro economics, sometimes called “Supply Side Economics” or referenced (less kindly) as “Trickle Down.” It’s a mine field for partisan rancor. DS is a kissin’ cousin of VDE, SSE and TD, but its not a grand theory of how economies work.  Why get into an argument where one side is pushed into a corner to defend Ronald Regan and Jack Kemp?

On the other hand, DS just says: “When you ‘score’ a bill that proposes to change the tax code, (please) take into consideration that it will possibly stimulate the economy and produce some new revenue, so that the cost of the proposed policy is somewhat less than measured by the ‘static’ approach.”  The static approach says if you cut the capital gains tax by 10 percent it will result in 10% less capital gains revenue.  Static scoring admonishes the frisky economist to KISS, i.e., “keep it simple, stupid!?”

DS is fiscally dangerous, because it creates the most slippery of slopes and vast opportunities for abuse that can lead easily to bad forecasting, then large revenue shortfalls, budget deficits, program cuts, or even tax increases (to plug the holes).  See Kansas and Pennsylvania. That’s why the CBO and nearly all states stayed away from DS for so long.

Slick marketers, some with real PhDs in economics, working for leading econometrics and finance software giants (like the REMI modelers), started convincing some analysts and politicians a few years ago that econometric models which perform DS have improved greatly.  Yes, they’ve progressed some.  But I would no more bet the U.S. or state budgets on them, any more than I would the family farm (in Brooklyn).

If adopted, DS will inevitably be used as a (Letterman) “stupid pet trick”  that allows (tempts) politicians to say that tax cuts (or spending increases) magically pay for themselves.  Yes, the DS manuever is available to both the tax cutters and spenders.   We have enough stupid pet tricks.

If its not yet clear, the intended take away from this note is: If you want to persuade your legislator or governor to stay away from dynamic scoring, there is no need to challenge implacable,  ideological world views of the economy.  Just stick to basic fiscal prudence.

This post, alas,  lacks some nuance and documentation. An earlier post on this blog was better in that regard. Here it is.

Have “Hate Crimes” Really Plummeted?

Murky Data

Murky Data

I sure hope that “hate crimes”  have actually plummeted in Los Angeles, to a 24 year low, as reported recently by the L.A. County Commission on Human Rights (LACCHR).  The data released by LACCHR was covered in a story buried in the L.A. Times, and hardly mentioned elsewhere.  I’m skeptical about the data, but wish they are true.

The California Office of the Attorney General (OAG) also reports a substantial decrease in hate crimes across the State.   Same goes for an FBI document,  which last year reported “a slight decrease” in those crimes nationally.    These reports from different governments and agencies, appear to rely on some common data sources, so they are not entirely corroborating one another.

Can the LA data really be true? I don’t have hard evidence to the contrary.  I am surely not a knee-jerk denier of government agency data.  I really want it to be true, that hate crimes are in free fall.  But you can’t blame one for being skeptical.

The Zimmerman, Sterling, Ferguson/Brown, Matthew Shepherd affairs, are still fresh in our minds.  So is the shocking video of the NFL football player knocking out his paramour in an elevator.  As is the deplorable banishment of Jewish scholars by some top American and British academic associations, because of differences over Israeli treatment of Palestinians.  And then there were the deeply unsettling images of enraged crowds, brandishing hateful signs in Murrieta and Escondido California, opposing measures and blocking buses trying to find temporary shelter for endangered Latino kids who crossed the U.S. border?

With all of this as background and context, the LA County report says anti-Jewish crimes fell 48%.  And that anti Hispanic crimes also plunged.  Could that be true?

Perhaps skepticism about the numbers is what kept the LA report from receiving more attention   Conservatives might say that “suppression of ‘good news’ by the mainstream media supports the liberals’ “perpetual victim hood agenda.”   But even conservative media, which has an interest in “proving” that vulnerable groups are being treated better and better every day in America, ignored the report,

If the LA County data actually reflect a diminution of hate,  or hate crimes, what would be the explanation?   Effective education?   Effective deterrence?  The haters have left LA for Murrieta?   More likely, it’s  a systematic change in the way hate crimes are defined and reported.  Or, simply yet another disconnect between what’s covered in the news — Zimmerman, Ferguson, Murrieta, and the like —  and what’s really happening to minorities, women, gays, and Jews.   The message: Cable news stories notwithstanding,  love and tolerance are actually breaking out all over.    (I don’t really believe that, but it is possible),

The LA Report itself begins with a thoughtful and candid discussion of the (generally) low quality of hate crime data, the problem of “under-reporting,” and the evolving (shifting?) definition of “hate crimes.”   So, why publish it at all when you think the data are unreliable?

Speaking of “hate,” I hate studies that lead with flashing red lights about the poor quality of the data; and then merrily go on to report them anyway, along with fancy, labor intensive graphics,  and elaborate explanations of what they mean.

I suppose LACCHR is legally required to collect and publish the data. Even if the numbers are in doubt or hard to explain, one of LACCHR’s missions is to keep issues of bigotry and hate crimes on the table,  and in the foreground.   That argument has some merit.   But LACCHR and agencies like them, must take to heart doubts such as those expressed here, work with legislatures and law enforcement officials to strengthen the collection protocols, and provide a solid response to the understandable questions in the minds of skeptics.

It would be really nice if the society was healing,  but we don’t want bad data to make us think the problems have gone away.



Silver and Wang Electoral Predictions: Genius or Glorified Grunt Work?

percy_xmas copy (1)

Percy the Cat, Elite Forecaster

Nate Silver and Sam Wang (S&W) have gained much acclaim for predicting election outcomes. Am happy for them. They are talented academics and scientists. But there is considerably less to their electoral prediction feats than meets the eye.

First of all, S&W are not really doing high level, sophisticated social science forecasting, as the media thinks.  Their work is measurement more than forecasting; description more than explanation; and involves polling expertise far more than political insight.

After digging into the minutiae of S&W’s methods, the familiar Edison quote about “genius” came to mind: “Genius,” Thomas Edison said, “is 1% inspiration and 99% perspiration.”  S&W are well trained statisticians, but their methods are not anything you wouldn’t find in a decent  graduate level stat textbook; and it would be mostly in the less daunting, descriptive stat chapters.

What separates S&W from the crowd is the sweat labor they employed gathering polling data from every village and corner of the country.  They amass these polls, well over 4000 separate ones, identify their strengths and weaknesses, and “aggregate” them in ways to get a better picture of the electorate a few weeks or days ahead of the election.

Yes, some of their “weighting” techniques for combining polls is creative, but little that CNN’s John King or your average R or D, cable news station “political strategist” wouldn’t immediately understand.  What’s different about S&W, is that other pundits didn’t have the fortitude (or wherewithal) to locate thousands of polls, capture their results, wring proprietary information about them from a few pollsters, and record all of this information in a (relatively) simple stat program or spreadsheet.

Bravo!  S&W deserve much credit for that.  We’d be shorting S&W by saying they (and now their worker bees) are doing no more than glorified grunt work;  but neither are their predictions divinely inspired or the work of genius.

To begin with, the feat of calling all (or nearly all) state presidential or senatorial elections correctly, is not as difficult as it sounds. That is especially true in today’s highly polarized electoral map. As I sarcastically said to a friend the other day, “my cat Percy could predict which party will win/hold about 80 of the 100 Senate seats in November..…simply because that’s how many seats are either SAFE or NOT UP FOR ELECTION. (Only one third of the Senate is up for election every two years).   Any barely competent, non partisan electoral handicapper would agree with that.

There are about 20 states among those with Senate elections in November where the election of a D or R would not be considered a black swan event; they are  theoretically in play,    But of those 20, about 10 are considered to LEAN STRONGLY in one direction or another. See for example Real Clear Politics, Politico or the Cook Report.

Thus, remaining in sarcastic mode, a Sea World Dolphin, being smarter than my Percy the Cat (though not treated as humanely), might do well (if not perfectly) predicting which party will own about 90 of the 100 Senate seats after the November 4th election.  The mainstream, non partisan electoral map handicappers widely agree the D/R split on those 90 seats will be between 44/46 and 46/44 on election night.

Now we’re in the home stretch, down to about 10 toss up states. There isn’t perfect agreement on the specific composition of the battle ground seats, but all the mainstream handicappers say there are 9 or 10 states where the election could go either way.  I’m going with 10 in this little exercise. (It’s a nice round number),

It’s of course a lot harder from here on. But, we’re dealing now with about 10 difficult calls; not struggling with 100 races to predict, as the fawning media makes it sound when they say Silver or Wang miraculously called the D/R split in the Senate,  or the 50 state electoral college outcomes perfectly.

Based on a scan of Real Clear Politics, Politico, Cook Report, and Rasmussen, it is a sure bet the D/R split of the remaining 10 toss up states will be somewhere in the
7-3 to 3-7 range.  Las Vegas odds makers would be exceedingly comfortable with that; probably also with 6-4 to 4-6, but I won’t push it.

Thus, without barely lifting a finger, we can confidently say the range of plausible outcomes is between 53/47 and 47/53.  Not between 0/100 and 100/0, as you might infer from the gushing and awestruck Rachel Maddow (who knows better) or Wolf Blitzer (who may not).  Most people reading this blog, probably already know this.  But more regular folks don’t, which is not a failing.

S&W’s celebrity status could wane soon, because their approach is prone to being upended by what social scientists call the Hawthorne Effect: Just the awareness of being closely watched (by a researcher) changes the subjects” behavior.  So, don’t you think all those obscure pollsters – the 3,980 other than prominent ones – are changing how they poll, now that they’ve been subject to S&W ‘s proctology exam?

S&W are aware of all that, and trying to stay one step ahead. That’s probably why Silver moved to ESPN (from the NY Times), where he can hedge bets on his career, regressing to measuring baseball performance, or embracing college basketball bracketology.   He won’t do nearly as well there because you have to really know something about forecasting and  basketball to predict the final four.

Climate Change Activist Says: “The Right is Right,” Saving the Planet Means an End to Capitalism

Groping for Solutions to Global Warming

Groping for Solutions to Global Warming

In her new book, “This Changes Everything,” climate change activist and long time, passionate critic of capitalism, Naomi Klein, says the Right Wing in America has a better understanding than the Left of what the Liberal Agenda implies for capitalism.   Her first chapter is titled, “The Right is Right,” by which she means that, yes, dealing with climate change implies an end to capitalism as we know it, just like Fox News and the Right Wing think tanks have been saying all along.

Klein makes no bones about that!  Her book is already being touted as the climate companion to Thomas Picketty’s  “Capital In the 21st Century,” which deals with capitalism’s tendency to produce severe wealth inequalities, as he sees it. Klein’s related point is that capitalism tends to produce catastrophic global warming.  Just replace “severe and inevitable inequalities” in Picketty’s work with “severe and inevitable desecration of the planet,” and you pretty much have the gist of Klein’s book.  (Here is a left view and a right view of Klein’s work).

Klein was recently interviewed about her new book on MSNBC.   Chris Hayes offered this teaser to the MSNBC audience before breaking for a commercial:

HAYES:  “Now, in a very provocative and I might say excellent new book, one of the left`s most celebrated and influential authors across the world, Naomi Klein says, ‘Yes, that is right, conservative fears about what climate change means for the global economy are well founded’”

Some of Hayes’ few Right Wing viewers must have switched the channel at that point, having captured all the material they needed for the next blog. They took Hayes’ provocative, “boost the ratings and sell the book” intro, as admission that climate change is a hoax concocted by the Left to sink free markets and to take over what remains, after Obamacare is through exacting its pound of flesh from capitalism (as the Right sees it).

Of course, Klein didn’t mean it exactly this way. Hayes of course knew that. Here, in her words, is what she actually meant — and eventually said — in the MSNBC segment:

KLEIN: “Yes. I mean, it is not true that it is some sort of conspiracy designed to smuggle in, you know, socialism and just using, you know, climate change as a cover. The fact is if we are going to respond to this crisis, we need to break a whole bunch of the free market rules that these guys hold very dear. We need to regulate. We need to get in the way of the fossil fuel companies, who have made it clear that they are willing to dig up five times more carbon than our atmosphere can absorb and still stay below catastrophic warming. We need to invest heavily in the public sphere.  But, I can understand why from a hard core free market conservative perspective, if you live at the Cato Institute and the American Enterprise Institute, this would feel like the end of the world. It is not the end of the world. It is the end of their world.” Here is the full interview from the MSNBC program.

Another way to convey what Klein is saying is with a title I first considered, but soon abandoned, for this blog post:  “If the global warming crisis is a socialist conspiracy to sink capitalism, then so was World War II.”  (Blog titles are supposed to be attention grabbing). What could I have possibly meant by that?  World War II was not only the mother of all economic stimulus packages  (which is of course not to say it was fought for that reason), but it also regulated the heck out of capitalism (which was necessary to fight the war), and ushered in thirty more years of activist government on the domestic side.

What Klein is saying is that if you believe man made global warming is as big a threat as the Axis Powers in the 1930s, there is no choice but to mobilize, aggressively regulate, and spend heavily in the public sphere, as we had to in WW II;  i.e., wage war against climate change.  We also accumulated debt in that era which makes our current sovereign debt problem seem manageable.

Of course, the Right would think comparing global warming to Hitler and Hirohito is absurd. But Klein thinks the threat to civilization is about as great; and that even “Green Capitalists,” like Virgin Airlines’ Richard Branson and former New York mayor, Michael Bloomberg, are so blinded by the imperatives of growth and profit, that they miss the point.  She laments that it’s unrealistic to rely on business to find solutions to climate change.

One big point Klein misses is that developing industrial societies like China, though perhaps not worshiping profits, aren’t ready to compromise on Growth,  the other part of the capitalist imperative.    The Chinese government doesn’t seem ready to adopt Klein’s solutions to curbing carbon emissions.  They think (wish?) they can pollute their way to growth, but clean it up as they go along,  with Geo-engineering and fantastic weather changing technology.   Klein regards that thinking as subversive.

Is There a U.S. Manufacturing Jobs Revival? Four Reasons to Damp Down the Celebration

Get that degree in black-smithing

Get that degree in black-smithing

If you’ve been following the business pages and economic blogs closely for the past year,  you’ve seen stories like the recent one in the LA Times, which raise hopes about a manufacturing renaissance in the U.S.  If they’re not predicting a resurgence, they suggest the bleeding of well paying, full-time manufacturing jobs has stopped.  An earlier, Washington Post story in 2013, poured some needed cool water on this wishful thinking.

If you are an economics,  jobs, wage, or “inequality” debate junkie, both articles are worth a read.  Overall, I am on the skeptics’, or the “glass-is-half-empty,” side.  Here is why:

There are four perspectives to keep in mind when you hear anything about a reversal in the manufacturing jobs decline.  Bring them to bear whenever you encounter this subject:

1) The anecdotal data is just that, stories here and there, which raise hopes, but pale next to the aggregate data.

2) These are not your father’s manufacturing jobs. They are better than flipping burgers at “In ‘N Out,”  but they are not the same in terms of wages, benefits, and security.

3) International currency machinations, particularly by the Chinese,  play a huge role in determining where manufacturing companies expand or re-locate. That can change on a U.S. dime (or Chinese Renmimbi).

4) Large productivity gains in manufacturing have not stopped; and they won’t. Technology offsets any other factors that may be raising hopes about a manufacturing jobs revival.

If you pour over the manufacturing jobs data from the Bureau of Labor Statistics (BLS) – the BLS is still the authoritative source – it’s very hard to distinguish between a (possible) manufacturing comeback, and the long awaited recovery of a few of the six million manufacturing jobs lost in the Great Recession.

Anecdotes about Chinese firms opening manufacturing plants in the U.S., and U.S. manufacturers bringing back jobs from China, are water drops in the sea of macro data from the BLS.  Between January and April 2014, the number of manufacturing jobs has remained about the same. (Yes, that’s better than losing jobs).  At 12.1 million in April 2014, manufacturing employment is still about 2 million below the pre-recession number. You can view the data here.

Even if you think the anecdotes are the leading edge of a turnaround, the average wage of recently added manufacturing jobs is about 10 percent below the figure for the rest of U.S. manufacturing.  Indeed, one explanation for some of the good news on the manufacturing front, is that it’s been fueled by a decline in U.S. manufacturing wages in real (inflation adjusted) terms.  Meanwhile,  Chinese and other competitors’ wages have at least kept pace with inflation.  A Wall Street Journal analysis notes: “The celebrated revival of U.S. manufacturing employment has been accompanied by a less-lauded fact:  Wages for many manufacturing workers aren’t keeping up with inflation.”

This should not be surprising.  A large share of the new manufacturing jobs are in non-union companies, generally in states with right to work laws.  Even in states more friendly to collective bargaining, unions have made concessions on wages to prevent job losses. See previous posts on Boeing wage concessions in Washington State, here and here.

Part of the rise in Chinese manufacturing wages relative to the U.S., which makes it less attractive to locate abroad, has been a rise in the value of China’s currency; that increases labor costs in China relative to the U.S.  These changes have come in part as a result of pressure on China by the U.S. and other western industrial countries to adjust it’s over-valued currency.

That’s good news, but not necessarily a basis for a fundamental turn in U.S. manufacturing jobs. With a restless labor force demanding double digit job growth to keep pace with population growth, can China continue on this course?  On the other hand, that same restless labor force, also wants to be paid more.  We’ll see how these competing forces play out in China.

Looming over all of this, is a forty year trend in technology related productivity gains, which has enabled manufacturers to produce more with less workers. This trend is not going to abate; if anything, it will accelerate.  Since 1975, manufacturing output in the U.S. has more than doubled, while employment in the sector has decreased by 31%.

China is predicted to lead the world in small drone production in the decade ahead. Why isn’t the U.S. becoming the hot spot for manufacturing the millions of personal and commercial drones that will soon be in demand?    This looks like another case where the U.S. developed the technology,  but won’t likely be producing it.   That’s the more likely trend than a manufacturing revival in the U.S.