The following is an original piece written by Dock David Treece for The Daily Journalist regarding how emerging markets have impacted domestic unemployment. The original page for the story can be found by visiting http://thedailyjournalist.com/elcafe/are-emerging-markets-like-china-the-main-reason-for-unemployment-growth-worldwide/.
As an Ohio resident, I can tell you that the problems of Circleville are typical of this entire region, now colloquially known as the “rust belt.” All over the Midwest, particularly in smaller cities that have traditionally relied on small numbers of large employers such as automakers, unemployment rates have remained at elevated levels, even as populations have dwindled due to lack of job availability.
All of this has gone on while the “outsourcing” wave which began more than 20 years ago reached fever pitch. Some blame President Obama, others blame our American educational system, while still others look simply at economics. The real reason for the problems being faced by towns like Circleville is a combination of all these and more.
Unfortunately, this phenomenon is nothing new. The same things happened to many western European nations hundreds of years ago while those countries rode their own “outsourcing” wave through colonization. The US went through a similar set of circumstances with Japan back in the late 1980s after large numbers of then-high-tech jobs had been sent overseas.
Like China today, Americans then thought Japan would own the world. Instead what occurred was a new wave of innovation in production and what was being produced, which refocused jobs and development stateside, with Japanese firms being left to engineer their own products to compete on the world stage. In the meantime, the Japanese economy had so much trouble adjusting that the island nation found themselves in a Keynesian liquidity trap after years and a lost decade.
It may not be likely that history will repeat itself for the American economy in the years ahead, but what is likely is that the future will look more like the distant past than recent history. In other words, while the market for blue collar American jobs has suffered in recent years, this won’t be the case forever.
In fact, based on the research we do every day in helping to guide investment for clients, we have found an increasing number of “reshoring” instances – with jobs coming back to this country in focused industries and geographies. Unfortunately, many of the policies coming out of Washington – through both the Obama administration and the Fed – have done more to stall this process than encourage it. Thankfully, this won’t last forever. Policies will eventually change, allowing the economy of the US (and the blue collar job market) to expand, making the US a largely self-reliant nation once again – just as it has done numerous times through different market cycles.
In fact, a large number of US companies are on the verge of making substantial investments modernizing domestic facilities, after years of opening and expanding operations outside this country. The average age of production facilities for US companies is over 21 years – the longest on record (Wall Street Journal) – at the same time US companies are also holding the largest cash reserves in history.
All of this spells expansion for domestic production by US companies – provided the right policies out of Washington. While they may not get those policies under this administration, things may change after 2016.