Manufacturing still vital

Posted: Thursday, July 06, 2000

NEW YORK (AP) -- According to some popular accounts, manufacturing in America is on the decline, a relic of the old industrial era that's now replaced by the information and service economy.

Really? Well, no, not at all.

Manufacturing hasn't declined in decades as a percentage of the gross national product. In fact, its contribution to growth during the economic expansion has exceeded that of services.

The sector's importance is sometimes slighted by an emphasis on the service and information economy, which provides the jobs and puts bread on the table. But somebody has to make the table -- and computers and cars.

Somebody also has to buy the products of the service providers, the output of government workers, programmers, teachers, lawyers and accountants -- and manufacturing is a very big buyer.

All this is prelude to what seems to have been happening of late in this sector, as measured by the latest index of manufacturing activity, and its significance for the economy. It's signaling a slowdown.

A slowing of the manufacturing pace has a multiplier effect. The National Association of Manufacturers, for example, calculates that sales of $1 million in manufactured products support about 16 jobs.

Six of those jobs are beyond the manufacturing sector, in areas such as office work and agriculture. And hourly wages in the 10 manufacturing jobs are among the highest paying; on average, higher than in services.

Manufacturers also are among the first to adapt the new technologies that have become a signature for our times. They are technology buyers, from robots and bar codes to business-to-business technologies.

Effects of this sort make manufacturing a good indicator of the economy's health. And based on its latest health report, the expansion is losing its robustness, its growth slowing but not disappearing.

Verification came in the fourth straight monthly decline of the NAPM index, maintained by the National Association of Purchasing Management, whose members are the biggest buyers of materials used in manufacturing.

Understandably, the index is viewed as an early indicator of things to come, and what it foresees isn't surprising. After six short-term interest rate in a year, a slowdown was to be expected.

What makes it more significant is the central role that manufacturing still plays in the economy, and the likelihood that what happens to this symbol of the old economy will spread widely to the new.

So many astounding innovations and visionary ideas have emerged almost weekly from the new economy, and so many flamboyant individuals have personified it, that we tend to think that what's old is dead.

Manufacturing never died or even declined; many of us just thought it had. But of course it can never die. If it did it would take both the old and the new economies with it.

End Adv PMs Thursday, July 6.

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