business news in context, analysis with attitude

The Associated Press reported that in a poll taken for it by Ipsos-Public Affairs, consumer confidence ranked its highest in 18 months during January, at a level of 100.1, up slightly from the 100.0 registered in December.

The low point was 61.5 in February 2002.

Economists attributed the strong showing to low interest rates and apparently improving job prospects.

However, there was some concern that even as the government reported that the unemployment rate dropped to 5.7 percent in December, its lowest rate in 14 months, payroll jobs during the period increased in the US by 1,000 - a about one percent of the increase that had been projected by experts. It was, however, the fifth consecutive month of job creation as opposed to job loss.

The US Department of Labor also reported last week that new claims for unemployment benefits increased last week by 14,000, to 353,000 - after three straight weeks of declines. Because the total number of jobless claims remains below 400,000 - as it has for 14 consecutive weeks - the current job market is not considered to be 'weak" by economists.
KC's View:
The employment issue - and the problem of diminished job creation - was illustrated by a report last week that Levi Strauss & Co. had closed its last two US sewing plants, shipping those jobs off to China and other countries.

Two decades ago, Levi has 63 US manufacturing plants making the jeans that remain a globally recognized symbol of American fashion. The company said the shift to cheaper labor markets was unavoidable if it wanted to remain competitive and survive. Levi has experienced seven years of declining sales from a high of $7.1 billion in annual revenue in 1996 to $4.1 billion in 2002; still to be released 2003 figures are expected to be between two and three percent lower still.

Today, the company - which started making jeans in the US in the 1870s - maintains only its headquarters, design, sales and some distribution functions in the US.

One astute MNB user dropped us an email pointing out that at approximately the same time that Levi made the decision to move its manufacturing operations overseas, it also began selling to Wal-Mart - which is well-known for driving prices down by sourcing product outside the US and encouraging/forcing its suppliers to do the same.

Coincidence?

Maybe. Maybe not. (We have to resist to temptation to blame EVERYTHING on Wal-Mart…)

But certainly there are broad issues here that need to be addressed. As manufacturing jobs move overseas, it also has been well documented that tech/customer service jobs also are being moved outside the US; after all, it is just as easy and a lot cheaper to man customer service lines in India than it is in Indiana.

Then you have what appears to be the driving down of labor expenses on the retail side, with some alarm buttons being pushed about what is described as the creation of a "working poor" class.

We aren't smart enough to be able to formulate a comprehensive solution to these problems; they have many sides and components, and it certainly isn't as simplistic as we've probably made it sound. We also don't want to be alarmist; the US remains the most prosperous and innovative country on earth.

But there does seem to be a kind of flirtation taking place with an economic black hole here from which there may be no return.

And it concerns us. And it certainly is an issue that needs to be debated.