Chinese assembly flow

I'm back from a week in Detroit with students [schedule here] that included factory tours at the Ford Rouge plant in Dearborn, Giffin in Auburn Hills and Continental Structural Plastics in Carey, OH. Both Giffen and CSP were 2017 PACE Award winners. Even though what they saw is a small sample of the range of processes in automotive parts manufacturing and final assembly, they now have a sense of what goes on.

So here is a really nice video that follows a vehicle through the assembly process. During our trip we didn't see welding robots but we did see a paint shop and robots inserting/removing material from a SMC stamping press. Because those were not metal parts we didn't see e-coat in the paint shop of Continental Structural Plastics in Carey, OH. We did however see the stamping of body panels, which is not shown in this video. We did see the roof liner being inserted in the Ford Rouge plant (though given the large number of things being done, students likely don't recall that one particular step). In any case much of this video should now be familiar to my students. Oh, and China is not much different from the U.S. Production in China is driven first and foremost by quality and speed considerations, not by labor costs, so robots do the welding and the heavy lifting.

NYTimes video

LF Participation: Improvement Continues

Mike Smitka, Economics
Washington and Lee University

...how many older workers can be enticed back into the labor market?...

Rather than headline unemployment rate I follow participation rates because so many would-be workers dropped out of the labor market during the Great Recession. In a couple age brackets we've now returned to normal as judged by the pre-recession average, which was roughly flat over the period 2000-2006. The black line is a moving average, which means that it lags as participation increases. The raw average is now at 99%, but bounces around a lot from month to month. I'm thus conservative in how I approach the data. While I do not correct for this (I don't have age-specific data) the share of the labor force working involuntary short hours is down to 3.3% from a Great Recession peak of 6.0%. Some of this improvement thus includes a transition from part-time to full-time work. It's taken 7 years, which means a lot of personal pain and sidetracked careers. But most of the slack in labor markets has now disappeared.

Of course these data are national averages, so there will be a lot of local variation. One caution: participation by older workers at near historic highs. The aging of the baby boomers means there are many people wanting jobs who a generation ago would have been fully retired. How many of them can be enticed back into the labor market? We'll find out over the next couple years. In the meantime, if labor markets really are tightening, then we should start to find employers offering higher wages to attract and retain workers, first on a regional level, then nationally. I however don't follow those data. I need to start reading the Federal Reserve Beige Book, which provides the qualitative impressions of Fed staff in each of its 12 districts.

Data Point: Real Yield Curve

Periodically I've posted graphs showing the future bond yields implied by the difference between (say) the yield on a 5 year bond and a 7 year bond. The Treasury also issues TIPS, bonds whose post-inflation yield is guaranteed. Doing so gives suggests after-inflation returns – the yield on a 2-year bond – of 0.65% in 2022. Over the past 10 years, as per the previous post, real bond yields lay below the real growth rate by about 0.65%. So will the ceiling on real growth over the next 5 years be 1.5%?? This of course is consistent with the argument of Robert Gordon that the US is seeing and will continue to see lower growth than experienced in the first four post-WWII decades. (For reference I also include one measure of inflation, the rate of increase in personal consumption expenditures after lopping off items with the highest and lowest price changes. This continues to trend just under 2%.)