Chatter's Grill PITTSBURG KS 66762-6649 - Sirloin Tips & 2 sGet This Coupon
Joplin Disc & Pain Solutions Joplin MO - New Patient Exam foGet This Coupon
SCHNELLE SHEET METAL - Schnelle Sheet Metal and The FireplacGet This Coupon
WLT Windshield Repair - $25 Windshield Chip RepairGet This Coupon
Derma Tech - Mothers Day Special $110.00Get This Coupon
Chatter's Grill PITTSBURG KS 66762-6649 - WINEY WEDNESDAY! 1Get This Coupon
Somewhere In Time Antiques - 10% OFF ANTIQUES & COLLECTIBLESGet This Coupon
HACKETT HOT WINGS - Signature Sauces & Rubs In Restaurant anGet This Coupon
Crabby's Seafood Bar and Grill Joplin MO - WINEY WEDNESDAY!Get This Coupon
El Charro - FREE Cheese Dip!!Get This Coupon
The United States' No. 1 strategic consultancy's latest study shows 2 million to 3 million manufacturing jobs and about $100 billion in output can be expected to return to the United States from China by 2020.
That's right. China, so often the scapegoat for U.S. joblessness - and an alleged "currency manipulator" - actually is becoming our best ally in the fight against high unemployment.
The BCG team says three things will bring millions of Chinese jobs back to America:
- Soaring Inflation. China's annual inflation pulled back to 6.2% in August after hitting a three-year high in July. It's rumored that the People's Bank of China will allow the yuan to rise further to curb rising prices. A stronger currency will make the country's exports and labor less competitive.
- Rising Wages. Chinese labor is steadily becoming better educated and more affluent. The central government is targeting an increase in minimum wages of 13% a year through 2015.
- And A Stronger Yuan. The yuan has risen about 30% against the dollar since 2005. Again, the great motivator here is not the saber rattling of U.S. politicians, but rather troubling levels of inflation that could spur civil unrest.
This should come as a huge relief for Americans.
Modern telecommunications and the Internet revolution made it easier and cheaper than ever before to run a global supply chain. Consequently, U.S. manufacturing was priced out of the market.
We saw it first in cheap clothing - a highly labor-intensive industry where U.S. factories were already struggling.
The move to Chinese clothing sourcing, pushed into overdrive by Wal-Mart Stores Inc. (NYSE: WMT), brought immense cost benefits to U.S. consumers. In fact, the Bureau of Labor Statistics price index for apparel has declined by 15% in nominal terms since 1993, compared with a 50% increase in consumer prices as a whole.
U.S. Federal Reserve Chairman Ben Bernanke and his predecessor, Alan Greenspan, helped this process along with their ultra soft money policies. We haven't had much inflation because of the price declines brought by outsourcing, but for many years it has been exceptionally cheap to raise money for investment in emerging markets. China and other emerging markets already had a cost advantage in cheap labor, and the Fed's loose monetary policies further encouraged outsourcing.
As a result, U.S. workers can now buy cheaper clothes from China through Wal-Mart, but are losing jobs and being forced to accept lower wages. And since Bernanke cannot be persuaded to reverse policy and raise interest rates, it was beginning to look as though U.S. jobs would drain away until American wages were at Chinese, or even African, levels.
However, the BCG report is a very welcome sign that this process could actually be coming to an end. Chinese wages have risen so much that U.S. labor is now competitive when its higher productivity and lower transport costs are taken into account.
Still, with a population of 1.4 billion, China's supply of cheap labor seemed almost infinite, so it is good to know that we are at least starting to reach the bottom of the country's labor supply.
According to BCG, the process of returning manufacturing to the United States will begin in earnest in roughly 2015, as Chinese wages and other costs continue to rise.
The seven industry groups most likely to return manufacturing to the U.S. are transportation goods, electrical appliances, furniture, plastics and rubber products, machinery, fabricated metal products and computers/electronics.
The tipping-point sectors account for about $2 trillion in U.S. consumption per year and about 70% of U.S. imports from China, valued at nearly $200 billion in 2009.
Other industries, such as apparel, will not quickly return. There, China itself is losing out to cheaper labor centers like Vietnam, and the industry remains labor-intensive enough that the U.S. is unlikely to regain competitiveness.
Four Profit Opportunities In transportation, the latest Ford Motor Co. (NYSE: F) contract with the United Auto Workers (UAW) provides for 12,000 new jobs to be returned to U.S. manufacturing plants by 2015.
With its labor costs no longer hopelessly uncompetitive and a strong position worldwide, Ford should be well placed to benefit from the return of manufacturing jobs to the United States. And those manufacturing workers are more likely to buy Ford products than their effete, import-buying, white-collar coastal cousins!
With a price/earnings (P/E) ratio of 6, and with profits likely to trend upwards with the automobile cycle, Ford looks attractive.
As far as appliances go, Whirlpool Corp. (NYSE: WHR) is likely to be a major beneficiary of increased U.S. competitiveness because of its strong U.S. market position. Transportation costs play a major role in competitiveness for bulky goods like washing machines, so once U.S. labor costs regain competitiveness, the market proximity of U.S. factories gives the company a decisive advantage.
Furniture is another bulky product. It's also an industry where deep knowledge of local tastes and trends is important, and it helps to have top quality sources of wood nearby - another problem for Chinese manufacturers.
Much of the U.S. furniture industry is privately held or part of a conglomerate, but two companies that might benefit are Ethan Allen Interiors Inc. (NYSE: ETH) and La-Z-Boy Inc. (NYSE: LZB). Both companies have market capitalizations around $430 million, but Ethan Allen is more expensive at 14-times earnings and 1.6-times book value. La-Z-Boy by comparison trades at 6.5-times earnings and just 1.1-times book value.
Of course, to me, there's only one choice: La-Z-Boy products are particularly attractive to us overweight and idle baby boomers!
News and Related Story Links:
- Money Morning:
China's Economy Continues to Ascend - But Watch Out for Speed Bumps
- Money Morning:
China Fears Much Ado About Nothing
- Money Morning:
Holiday Retail Sales Set to Slide Amid High Unemployment and Low Consumer Confidence
- Money Morning:
Don't Get Stung by President Obama's Deficit-Reduction Plans
Tags: currency manipulator
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Press Release Service provided by PRConnect.
Stock quotes supplied by Telekurs USA
Postage Rates Bots go here