EconomyWritten by Havre On 11 September 2012
Lights-Out Manufacturing And Weak Employment

The U.S. Department of Labor released weak but positive employment growth for the month of August. The government report showed a growth of 96,000 private sector jobs when analysts were looking for a higher number of 125,000.

With American corporations posting record earnings, why are the unemployment numbers not dropping? One of the major reasons is that companies are increasing productivity through technology advances, alleviating the need to hire additional workers.

A new term has arisen from this phenomenon: Lights-Out Manufacturing. In their attempt to compete with foreign competition’s low wage rates of $0.50 to $1.00 per hour in countries like China, Vietnam, Taiwan and in South America, American manufacturers are looking to technology and machinery to survive.

The manufacturers are looking to go 24/7, adding new shifts, typically graveyard (or, lights out) without adding personnel. They are looking to hire just a few higher skilled employees that would be there to monitor equipment through the cloud, using iPads and other new technology advances.

The purchasing of technology can be rapidly depreciated and, in some cases, can be a direct expense. Whereas hiring additional personnel creates contingent liabilities with FICA payments, medical coverage’s, sick leave and vacation pay, etc.

This increase in tech is evident in share prices of the companies that make up the NASDAQ, which recently hit a 12-year high. In the last 13 weeks, tech leaders have been leading the way. Google is up about 25 percent and both Apple and Amazon up almost 20 percent.

Although we have seen an increase of over 500,000 of manufacturing jobs over the last two years, the real jobs are coming from tech and that trend will surely continue.

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Havre

Randy Havre has a wealth of experience in the financial industry. In 1987, he established his own full-service stock brokerage firm, which was also registered with the SEC as an Investment Advisory Firm, managing money for the State of Hawaii’s pension fund, among other portfolios. In 1994, he started his first of three Hawaii based Venture Capital Funds. Additionally, he wrote a weekly stock column in the Pacific Business News for 21 years, taught Finance 315 Portfolio Management and Investment Strategies at the University of Hawaii for five years and is on KHON’s Morning News as a business/financial analysis twice weekly. Over the past nine years, Havre has been active in South America doing business development work for some of his portfolio companies, mentoring entrepreneurs and advising investors.

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