3 takeaways from the (first) week in manufacturing

By Bart Taylor | Jan 07, 2018

Fresh off an eventful 2017, manufacturing picked up where it left off and continues to make news:

1. Manufacturing's employment surge defies conventional wisdom

The business press is conflicted about manufacturing's role in America’s 21st century economy. Much of the ambivalence stems from manufacturing's employment paradox: U.S. productivity is at all-time highs, employment near an all-time low. With total jobs as the measure, it's easy to conflate today's otherwise healthy sector with a bleak future, and many analysts do.

In 2017, we forecast that employment growth in dynamic manufacturing industries would offset losses in sectors that clearly are in the midst of a fundamental change. New data from the Bureau of Labor Statistics released last week suggests we were right.

The United States added 196,000 jobs in manufacturing in 2017, according to data released today by the Bureau of Labor Statistics. In December 2016, there were 12,343,000 people employed in manufacturing in this country, according to BLS. By December 2017, that had risen to 12,539,000.

That represents a dramatic swing from the year before. In 2016, according to the historical data published by BLS, the United States lost 16,000 jobs. In December 2015, according to the data, there were 12,359,000 people employed in manufacturing in the United States. That dropped to 12,343,000 in December 2016.

Will the net gains hold? Can manufacturing continue to add 200,000 jobs per year to offset structural losses sure to impact legacy industries?

The answer lies in our collective ability to nurture and accelerate thousands of new domestic brands alongside a capable new supply chain. Develop the supply chain and companies will make more things here.

2. Tesla's production challenges challenge business analysts

Elon Musk would likely admit that a good share of personal and professional criticism he receives is well earned. But criticism of Tesla's Model 3 production challenges is unrelenting.

In the latest fusillade, Business Insider lectured, "Tesla's Achilles' heel has always been its inability to build cars as effectively as the Toyotas and General Motors of the world." Forbes' Jim Collins lamented, "Tesla is not a sustainable enterprise from a manufacturing standpoint, and investors buying the stock at current levels are completely missing that fundamental truth." Stock picker Seeking Alpha announced, "Tesla's game is ending."

Tesla's operation isn't perfect, but among other things the company has demanded accountability from its supply chain, a kick in the pants that has already had a positive impact on U.S. manufacturing. Hale Foote, president of Tesla supplier Scandic, said in a CompanyWeek interview, "Bay Area companies like Tesla and Apple want to fail faster to succeed sooner. . . . In Detroit for example, there's a seven- to 10-year development cycle. That's why Tesla is so different. They don't follow that old way of thinking. The idea is to iterate constantly and invent, invent, invent."

No doubt Tesla's cash burn and Musk's financial brinksmanship are unsettling. But capital markets exist to be tapped. Even if Tesla tanks, and I'm betting on Musk, we'll have been reminded that a steadfast commitment to domestic sourcing and manufacturing every single part of a complex product locally is possible, given the will.

3. Colorado companies innovating with cannabis

Editorial writers at the Wall Street Journal would have done well last week to cut short their defense of AG Jeff Sessions after making the very reasonable point that Congress must legislate a permanent reconciliation to the contradictory state and federal laws driving marijuana businesses -- and Sessions -- nuts.

Instead, the WSJ argued that a burgeoning $10 billion market would be better left in the shadows, its proprietors subject to federal prosecution, until such a time that Congress agrees otherwise. It seems a fatuous argument give the current state of dysfunction in D.C. and the stability of state-run marijuana markets.

Lost in the self-serving data cited by the WSJ is the irony that the attorney general's views lack any connection to science or a scientific method.

We’re here to help out the AG.

In Eric Peterson's enlightening summary of innovation in Colorado’s marijuana industry, we revisit a dozen cannabis companies profiled in CompanyWeek the past few years. Science and technology inform some, manufacturing acumen guide others. All are motivated entrepreneurs pulling a multi-billion dollar industry out from the shadows into the mainstream. In any other industry, the WSJ would be extolling their virtues. We'll do it instead.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.