Masters Series: America's Factories Are in Recession
Editor's note: It all started with a search for a new pair of sturdy, American-made work boots...
Forty years ago, they were the boot of choice for the working man. Today, they're a fashion statement.
In today's weekend Masters Series – originally featured earlier this month in the free Bill Bonner's Diary e-letter – Agora founder Bill Bonner explains what his new boots showed him about our declining work force, a manufacturing recession, and the fate of the U.S. economy...
America's Factories Are in Recession
By Bill Bonner, editor, The Bill Bonner Letter
We needed a pair of good work boots; on weekends we're fixing up an 18th-century farmhouse in France.
We've never found a French-made boot that fits well. So we went online to see if we could get a pair of American boots delivered.
To our great delight, an old favorite – Red Wing Shoes – has stores in several cities in Europe; it ships to France. They were absurdly expensive – $299 – but we figured we would have them for the rest of our lives.
The boots arrived on Saturday and were just like the ones we bought 40 years ago. Same stiff, solid construction. Same rich smell and last of leather. Same Minnesota simplicity.
But something was different. In with the boots was a magazine celebrating the history of the company. It was a stylish advertising piece; we wouldn't have expected it from such a sweaty, shop-floor boot company.
Even more remarkable were the photos. They showed young people in various chic urban settings: Brooklyn. San Francisco. Berlin. They were all hipsters!
Not a single picture showed a man lifting, toting, turning, hammering, or cutting – the things you're supposed to do in boots like these.
Instead, now, they are for hanging out... going to bars... and looking cool. They've become a fashion item.
A Manufacturing Recession
What happened?
How come America's premier work boots are no longer pitched at America's working men?
One reason: America's working men don't need them...
Here's the latest from Alan Tonelson at RealityChek:
Although the American economy created a surprisingly strong 271,000 net new jobs in October, manufacturing generated no gain during this period.
Largely as a result, the sector's absolute employment levels are now lower than in January, a 10-month stretch that qualifies as a recession.
But that is only part of the picture. According to the news headlines at the end of last week, the U.S. unemployment rate fell to 5% – a sign of a robust economy.
Look further and what you find is nothing of the sort. Our old friend and Strategic Investment editor Jim Davidson explains:
The headline job growth [the aforementioned 271,000 jobs] was overstated due to extraordinary and unreported seasonal adjustment factors.
Also suspect (or at least interesting) is the report that virtually all the job gains were accounted for by workers aged 55 and over. Since 2007, the BLS reports workers 55 and older have gained more than 7.5 million jobs, while workers younger than 55 have lost a total of 4.8 million jobs.
Deeper Problems
But Red Wing Shoes has deeper problems...
First, buyers can get boots cheaper elsewhere. Foreign made, with man-made materials, the new boots are probably just as good and much less expensive.
Second, American workers may not be able to afford American-made work boots.
In real terms, the typical man of working age in the U.S. earns less today than he did in 1975 – 40 years ago.
Also, the "labor participation rate" – which measures the number of people employed or actively looking for work – is back to where it was in 1967.
Back then, it reflected that women were much less likely to have jobs. They stayed at home and looked after families. Now, it's the men who are more likely to be jobless. What they are doing is not clear. But they don't need American-made work boots to do it.
Under the circumstances, Red Wing Shoes seems to have made a good move...
Like Harley-Davidson, it has positioned its products as American fashion artifacts – relics of past glories, not modern footwear.
Regards,
Bill Bonner
Editor's note: Employment statistics aren't the only story being hidden from the public. In fact, they are only a small symptom of a much deeper problem... one the feds recently spent $4.5 trillion trying to contain. Get the full story – along with specific steps you can take to protect yourself, your family, and your wealth – by clicking here.
And if you're as concerned about our future as Bill is, consider signing up for a risk-free trial subscription to The Bill Bonner Letter. In his latest issue, subscribers learned a simple strategy you can use to immunize yourself against market swings and comfortably ignore the looming market collapse. Bill personally uses this strategy, which you can use no matter where you live or how much money you make. Learn more here.