July 18, 2011
The economic picture remains complicated. On one hand, some indicators suggest that we are beginning to rebound from a lackluster second quarter. We have seen a turnaround in durable goods sales, and industrial production has risen somewhat (although there is room for improvement). Retail sales figures also have had weak but positive growth.
One thing to be thankful for is the easing of prices. Both the consumer and producer price indices fell in June, mostly due to lower energy costs. In each case, though, food prices continued to grow, and core inflation has edged higher for each of the past few months. With the rapid run-up in prices over the past year, pricing pressures remain a concern for many businesses.
Against the backdrop of good news and the hope for an economic rebound, we continue to see signs of weakness in the economy. Small businesses remain anxious about their situation, stalling the sector's willingness to hire new workers, purchase new capital equipment, or seek to grow their business. In May, manufacturing separations outpaced hirings for the first time since October, and while this was mainly the result of temporary phenomena, it does complicate the nation's economic recovery. Highlighting this fact is the observation from the New York Federal Reserve Bank’s July survey that manufacturers in the Empire State continue to experience weaknesses.
In that very same survey from the New York Federal Reserve, it is interesting to observe the contrast between the views of the present economic environment and the respondents' expectations for the next six months. While manufacturers in the state are currently reporting a deterioration in output, they are much more optimistic about new orders, shipments and employment for the second half of this year. This is definitely good news and consistent with my and other economists' forecasts.
This week, much of the news will focus on the housing market, which remains depressed. In addition, we will get a glimpse of the manufacturing sector from the Philadelphia Federal Reserve Bank, and the Conference Board will report on its Leading Economic Indicators index.
Chad Moutray
Chief Economist
National Association of Manufacturers
POLL: HIRING EXPECTED TO PICK UP
Today in Manufacturing
Economists increasingly see hiring picking up through the rest of 2011, even as they predict slower overall growth, NABE survey shows ... continue
FITCH EXPECTS MORE CHINA CORPORATE FRAUD PROBES
Today in Manufacturing
Fitch said last week it was reviewing the 35 Chinese companies that it assigns credit ratings to after a spate of allegations of corporate fraud ... continue
ZIONS BANK WASATCH FRONT CONSUMER PRICE INDEX: TRANSPORTATION COSTS DROP SHARPLY AS OIL PRICES FALL
Utah Pulse
In June 2011, on a non-seasonally adjusted basis, the Zions Bank Wasatch Front Consumer Price Index (CPI) decreased 0.2 percent after rising 0.4 percent in May. The national Consumer Price Index, which is a culmination of all prices throughout the U.S., decreased 0.1 percent in the month of June.
{read more}
US UNEMPLOYMENT TO STAY ELEVATED THROUGH 2012: ANALYST
CNBC.com
While most economists expect to see a rebound in the U.S. economy in the second half of the year, the strength is unlikely to seep into the jobs market, according to one analyst.
AP
"This is the worst recovery in employment in post world war two history," David Mann, Head of Americas Global Research at Standard Chartered Bank told CNBC on Friday. "In fact we have not even come close to recovering from the actual losses of jobs that we've seen through recession."
The most recent American payrolls report showed the U.S. economy adding a mere 18,000 jobs in June, following the equally weak 25,000 figure in May; while the unemployment rate edged higher to 9.2 percent.
Mann doesn’t expect the jobless rate to nudge below 9 percent any time soon.
"We think it's going to be very tough indeed, even by the end of 2012, for it to be below 8 percent," he said, citing continued weakness in the small and medium enterprises (SMEs) in the U.S., which account for 82 percent of employment.
"If you don't have the credit being extended to the SME sector, you're not going to get strong growth in that area and you won't get strong employment," Mann said.
The National Federation of Independent Business' optimism index, which tracks the pulse of small American businesses, dipped 0.1 point to 90.8 in June, and forecasted a deterioration of business conditions in the next six months.
Mann says a ‘skills gap,’ where employers are unable to find candidates with the right talent for open positions, is worsening the problem.
“The longer that you're out of a job, the harder it is to get back into it again, the skills that you would have learned on the job you don't learn; the skills you did have, you start to forget about them,” he said. “There are jobs out there, the problem is that it's again skill mismatch as well.”
Entitlement programs, like unemployment benefits, are also to blame, according to Mann, as they are causing a lack of motivation in American job seekers.
"If you know that you're going to have to be finding something because your benefits will run out very quickly, it is an extra incentive to really go out and find the jobs," Mann said.
MANUFACTURING FLAT IN JUNE BECAUSE OF WEAK AUTOS
Today in Manufacturing
The Federal Reserve said U.S. auto factories produced fewer goods in June than the previous month, and overall factory production was flat ... continue
REPORT: MANUFACTURING TECHNOLOGY FALLS IN MAY
Today in Manufacturing
May U.S. manufacturing technology orders was down 2.6 percent from April but up 121.3 percent when compared with the total of $175.46 million reported for May 2010 ... continue
CHINA ALMOST DOUBLES RARE EARTH EXPORT QUOTA
Quick Manufacturing News
Quota for the next six months of the year is up 97.3% from the 7,976 tons set for the same period last year Click to continue
OUT WITH THE OLD, IN WITH THE NEW: ADDRESSING YOUNG WORKERS' TRAINING NEEDS
Quick Manufacturing News
According to a new poll, Generation Y workers, or those ages 18 to 29, are more likely to appreciate shorter training sessions, flexible training options and remote learning enabled by mobile devices. Companies therefore should consider adapting their training programs in order to better engage these young workers. Click to continue
PASSING TRADE AGREEMENTS COULD ADD 250,000 JOBS SAYS INDUSTRY GROUP
Quick Manufacturing News
Business Roundtable says not passing agreements could cost 400,000 jobs Click to continue
EQUIPMENT LEASING SEES ANEMIC GROWTH
Quick Manufacturing News
The Equipment Leasing and Finance Association just released the annual Survey of Equipment Finance Activity showing an overall 3.9% increase in volume in 2010 after a significant 30.3% decline reported in 2009 and a 2.2% decline reported in 2008. Click to continue
MANUFACTURING REMAINS FAIRLY ROBUST SAYS INDUSTRY GROUP
Quick Manufacturing News
Manufacturer's Alliance/MAPI's R&D index reached a record high of 83% in the June survey, a solid increase from 75% in March. Click to continue
ANALYST: CONOCOPHILLIPS SPLIT IS A STRONG MOVE
Quick Manufacturing News
Split allows the company to focus on more profitable exploration business. Don't be surprised if other oil giants follow suit. Click to continue
T- MOBILE V. UTAH STATE TAX COMMISSION- TAXPAYER FAVORABLE DECISION REGARDING THE UTAH TAX COURT AND THE NON-TAXABILITY OF GOODWILL
Mark Buchi – Holland and Hart
The Utah Supreme Court rendered an important decision for Utah’s taxpayers on two distinct fronts. On June 3, a unanimous 5-0 decision authored by Justice Parrish held that accounting goodwill is not subject to Utah’s property tax and, also importantly, that the tax court established by the vote of the people in 1998 is a court where the taxpayers can do legal battle with the government taxing authorities on a level playing field. Thus, in tax court, the party with the best substantive evidence wins the case. The court noted that no deference is to be paid to the property tax division of the tax commission nor the tax commission’s valuations of property in a tax court appeal.
This means that the taxpayers who appeal a decision of the tax commission can expect to have their case heard before an impartial judge who is not connected with any aspect of the tax commission and who will apply the preponderance of the evidence test in weighing the evidence placed before the court. If the taxpayer has the better case they should prevail. If the government has the better case they should win.
Prior to the establishment of the tax court by constitutional amendment, the taxpayers had an uphill fight due to the deference paid to the tax commission’s decisions. Under a prior test of a previous law, if a case was a close call, the tax commission would win.
While the T-Mobile decision was a property tax appeal, the portion of the decision dealing with the tax court should apply to all tax commission assessments including such well known taxes as sales and use and income.
The substantive ruling on the goodwill issue should put to bed a multi-decade battle between many of the counties in Utah and taxpayers who have substantial goodwill to report on their financial statements. Several battles over the years between taxpayers and the counties have resulted in legislation trying to tax or exempt goodwill from ad valorem taxation. The ruling makes it clear that under the Utah Constitution the state may not tax the income earned from intangible property via the income tax and also subject the goodwill and other intangible property to the property tax. The decision validates the current property tax statute that was enacted in 2006 that lists goodwill as exempt intangible property. Regardless of any statute, the T-Mobile Court has made it clear that goodwill is not taxable under the Utah Constitution.
Goodwill has become an increasingly visible asset for companies in light of new accounting rules requiring companies to evaluate the fair value of their assets and segregate the value of the tangible assets, the separately identified intangible assets like patents and trademarks and accounting goodwill. Accounting goodwill is often produced when a company pays a premium to acquire another company. The Utah court also pronounced that typical goodwill such as business reputation and patronage should be viewed as interchangeable with accounting goodwill for Utah property tax purposes.
Another important position of the court in this decision centers on multi-county and multi-state taxpayers whose property is required to be assessed by the unitary method. The state and counties have often argued for the position that for such properties, the income stream should be capitalized and the synergy in value of the business is taxable as tangible property. The court reinforced earlier decisions that held that his enhanced value should be taxed. The counties have argued that goodwill is such a taxable asset. The court disagreed and rather agreed with the taxpayer that synergy values are already reflected in the tangible property values and are not reflected in the accounting goodwill.
This decision will be an important part of the business fabric of Utah, reaffirming that Utah is a favorable place to do business.
This case was tried by two Utah lawyers who have actively assisted the manufacturing association with tax issues over many years. Mark Buchi, former Chairman of the Utah State Tax Commission and now a partner with the law firm of Holland & Hart LLP and Steve Young, a partner at the same firm tried this case in the tax court and briefed and argued it before the Utah Supreme Court.
MADE IN UTAH
Manufacturers Returning Production to Utah Roots
Tom Haraldsen
Ray Malley remembers something his late father used to say to him whenever the elder Malley made a purchase.
“He’d say, ‘if it’s made in the USA, it’s good for the USA. Closer to home is better,’” Malley recalls. Now, the advice that the former Californian received from his father may be in step with that of several local manufacturers who’ve started a new trend—bringing their manufacturing back to the state from abroad.
“Not only have I been hearing that it’s going to happen, it’s a fact,” says Lew Cramer, president and CEO of the World Trade Center Utah. “Manufacturers in this state, and in several other states, are asking themselves what makes the most sense to do. They no longer say, ‘Hey, I’m going offshore no matter what,’ because that is short-sighted. I’ve talked to several local manufacturers who are no longer interested in going to China for their products, and that’s a great thing for Utah.”
Quality Counts
A number of Utah manufacturers discussed the subject at a Utah Business roundtable earlier this year (see our April issue). Companies such as Orem-based Mity-Lite and Bountiful-based Orbit Irrigation have expanded their local production efforts and have been importing less and less from Asia. Other Utah companies such as Little Giant Ladders and BlendTec are doing the same.
There are several reasons for the shift in strategy—customer loyalty being among them.
“We have noticed in the stores and through visits with customers that pro-ducts that say ‘Made in the USA’ sell better here, as well as in foreign countries,” says K.C. Ericksen, president and CEO of Orbit. “We’ve found ways to make the move back to local manufacturing more strategic, and it’s helped us on many fronts.”
Cramer, who visited China as part of a state-sponsored trade mission trip in April, observes that “thousands of [Chinese] companies have gone out of business” over the past couple of years, due largely to the fact that manufacturers are choosing to bring their production back to their native countries.
“There are many advantages for doing that,” Cramer says. “Among them are more quality control, employee morale and motivation, and reducing costs by incorporating more and more automation into the process. Price alone [by importing products from China] is becoming less of an incentive for companies who want to keep production at home.”
Mity-Lite is a great example.
“Our decisions [on importing] have gotten clearer over the past few years,” Mity-Lite COO Brian Bowers says. “There are some products that we’ve brought back in-house, the most successful ones like our Mesh-One and Flex-One products. We had intended to outsource them, but our operations team asked if they could bid, on behalf of our employees, against foreign pricing. We concluded we could probably do it less expensively here than overseas.”
The highly popular Flex-One folding chair is the company’s first entry into retail, and it’s now selling in more than 400 Sam’s Club stores nationwide. The chair is made entirely at the Orem plant. What made in-house production preferable to importing the chair?
“One reason is that shipping costs are rising,” Bowers says. “We’ve seen our [shipping] container cost go up by 33 percent in the last two years from China. Then there’s the unfavorable currency issue in China, where it’s changed negatively by 25 percent for them, which has made pricing difficult for them to get hold of. We used to have all of our table legs made in China, but by making some adjustments, we started bringing the manufacturing of those legs back to the U.S. two years ago. Now, 95 percent of our legs are made here.”
Lag time is another issue, as the old proverbial phrase “it’s on a slow boat from China” is more reality than metaphor.
“Almost all of our standard products can ship within two weeks when we make them here, and that’s outstanding for our industry,” Bowers says. “You can warehouse a lot of product you get from overseas, but that costs as well. And because so many of our products are custom made, we’d have to hold lots of different SKUs.”
Chinese manufacturers won’t start working on a product until it’s ordered, and shipping takes at least four weeks. So it might be seven to eight weeks from start to finish to get product from overseas. “It’s painful,” he says.
The Home Team
Bowers and Ericksen agree that as more and more product is made at their plants, employee morale and motivation has improved.
“I think one upside is that our people feel more secure,” Ericksen says. “They know that as we succeed, they succeed as well.”
“Certainly, our team has really jumped in,” Bowers adds. “They know that they are competing not just in Utah or the U.S., but globally. We’ve helped our employees realize that as we continue to improve and produce here, it’s better for everyone.”
Ericksen does have one concern: the need for a larger, technically trained workforce for the automated processes many companies use.
“We don’t have enough technical people in the state to support what we’re building here—people who are technicians in injection molding and extruding,” he says. “We end up training a lot of people, but Utah has many high-tech medical companies who need people with those same skills. And so we’re in competition for workers with those skills. I’d like to see more money used towards technical training.”
If the trend of bringing manufacturing back home to Utah continues, it’s a need education officials should happily address.
ARE MILLENNIALS LOOKING FOR THE EXIT?
Quick Manufacturing News
Companies that are looking for ways to attract, retain and motivate their younger workers need to make sure they can keep these individuals on staff once the economic recovery is over. Click to continue
WHY YOUR EMPLOYEES SHOULD HAVE 'SKIN IN THE GAME'
Quick Manufacturing News
Offering equity in the company is the best way to motivate your workers, OfficeMax co-founder says. Click to continue
AMID SLOWING U.S. DEBT DEMAND, CHINA RAISES HOLDINGS
Quick Manufacturing News
China, as the biggest investor in the United States, is being closely watched for shifts in its demand for U.S. debt. Click to continue
SALT LAKE CITY NAMED ONE OF 15 GLOBAL 'BEST NEW CITIES FOR BUSINESS'
EDCUtah
When the editors at Fortune Magazine set out to identify the "next business hot spots" around the globe, they couldn't pass up Salt Lake City. In fact, Utah's capital city is one of only two U.S. cities to make Fortune's list of the "15 Best New Cities for Business."
"This is incredible news for the state," says EDCUtah President & CEO Jeff Edwards. "Such a ranking confirms all of the other great accolades Utah has received and draws attention to our unique public-private partnerships -- the willingness of our elected officials to work with the business community -- that attract and help businesses flourish here."
Further, Edwards says EDCUtah was pleased to work in partnership with the Salt Lake Chamber and World Trade Center Utah in supplying data for the Chamber's submission to Fortune's editors.
The establish its list, Fortune's editors "looked at economic data, asked business leaders where they planned to open new offices and factories, and called on Booz & Company consultants to suss out emerging innovation hubs, especially in Asia." Here are the cities that made the cut, listed alphabetically:
Ahmedabad (India)
Austin (USA)
Bogota (Colombia)
Chengdu (China)
Chongqing (China)
Doha (Qatar)
Gurgaon (India)
Lagos (Nigeria)
Melbourne (Australia)
Salt Lake City (USA)
San Jose (Costa Rica)
Santiago (Chile)
Stockholm (Sweden)
Vancouver (Canada)
Warsaw (Poland)
Fortune's web site contains a map that includes profiles of each city with fun facts, major companies, key universities and population. Regarding Salt Lake City the magazine says, "Move over, Stanford: The University of Utah claims to lead the nation's universities in creating successful startups--and the Brookings Institution says the city's workforce is the nation's most productive. More reasons businesses like Salt Lake: Inexpensive utilities and state property taxes, and corporate taxes that are the ninth-lowest in the U.S." How could Salt Lake City make such an impressive list? Here is a short list of good reasons:
Demographics
Salt Lake City is becoming increasingly diverse, the end result being a young, rapidly growing, diversifying and healthy population that attracts new companies to our state. In fact, Utah's workforce was the number one reason ITT choose to expand here with 2,700 jobs, and our workforce continues to attract companies like EMC, IMFlash, Adobe and Procter & Gamble.
Further, Utah has the highest proportion of second language speakers in USA (33 percent of working Utahns speak more than one language fluently). Hence, our talented workforce, with its skills in foreign languages and cultures, is one of the reasons global companies such as Goldman Sachs, American Express, and numerous other financial entities have major operations in Utah.
Utah arguably has the most unique demographic profile in the nation: the highest fertility rate, the youngest population and the largest family sizes in the country. Further, Utah's population is among the nation's healthiest, as measured by life expectancy, and typically ranks among the top three states in population growth. Meanwhile, the state's quality of health care per dollar is among the highest in the nation.
Economic Diversity and Stability
Salt Lake City (and the state) enjoys economic diversity that is a surprise to most outsiders. In fact, the state's economy offers a little bit of everything -- defense, agriculture, tourism, manufacturing, transportation, high tech, financial services and more. Moody's ranks Utah's economic diversity sixth in the nation. Utah enjoys economic stability, even in its rapid growth. The state is an "island of stability" with a business-friendly tax and regulatory environment. CEO Magazine says Utah is the 9th best state in which to do business, while the Tax Foundation says Utah has the sixth best corporate income tax climate. Utah also has the 13th best individual income tax rank.
Utah enjoys the 4th lowest energy costs in the U.S. (35 percent below the national average) and has the best economic climate, according to Pollina Corporate. Moody's projects the Utah economy to grow four percent annually over the next five years. Unemployment is forecasted to average 5.5 percent in 2012, while household incomes are growing five percent per year -- the fastest rate in the U.S.
Fiscal Fidelity
Utah sets the standard among states for fiscal responsibility. Governor Gary Herbert and the State Legislature have managed the affairs of the state so responsibly that even after the longest, deepest and broadest recession in over seven years, Utah still has money in the bank -- and managed through the Great Recession without a general tax increase! The state's rainy day fund balance is over $200 million currently. Utah also has a constitutional balance budget requirement, a line-item veto, a constitutional bond limitation, statutory appropriations limitation, and a mandatory fiscal note process for all legislation. Such fiscal prudence demonstrates to business that Utah is a safe investment and a place where the public and private sector work well together.
Vision
It can be said with certainty that Salt Lake City "knows what it wants to be when it grows up." A 40-year vision called Downtown Rising (DowntownRising.com) demonstrates the spirited commitment and extraordinary investment being made in the future of Salt Lake City. The vision is to be a global city, a city of learning, a green city, a center for arts and culture, and a welcoming city. Further, eight signature projects have been identified for today's leaders to develop and leave for the next generation of city builders. These include regional rail, downtown living, a new Broadway-style theater, a public market, a network of trails, a flagship sports and fitness center, a World Trade Center and a university/college town ambiance. The University of Utah's recent entrance into the PAC 12 is a part of the realization of this vision. So is the development of 70 miles of rail in seven years and the opening of the nation's largest downtown mixed use development, City Creek Center, which is slated to open on March 22, 2012. Salt Lake City is undisputedly on the rise.
Morever, Salt Lake City is an exceptionally clean, safe, friendly, well-organized, well-running cosmopolitan city with a startlingly open approach to culture, restaurants, entrepreneurship, educational attainment, and international opportunities. That coupled with incredibly gorgeous natural beauty (mountains, snow, hiking, biking, etc.) make Salt Lake City the complete package!
A Global City
Salt Lake City is the hub of global activity in Utah, while Utah is the ONLY state in nation that doubled its exports the past five years. The neighboring states of Arizona, Colorado and New Mexico suffered a drop in their exports over the same five year period. Further, Utah was the only state in nation to enjoy expansion in its exports from 2008 to 2009, according to the U.S. Department of Commerce. This is critical because exports directly create higher paying jobs.
Utah's export growth to date is already 20 percent ahead of last year's record pace. Also, a major international bank reports that Salt Lake City consistently ranks in the top five of its foreign exchange markets in the USA.
Salt Lake City is also a key transportation and distribution hub for businesses activity from Canada to Mexico and the entire Western U.S. As the "Crossroads of the West," major highway systems and the rail lines of three western ports converge in Salt Lake City.
UMA JOINS OTHER ASSOCIATIONS IN SUPPORT OF REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011
UMA added its name to the following letter to the U.S. House of Representatives in support of making improvements in the flexibility of regulations for small business.
To Members of the U.S. House of Representatives:
We are writing to express our support for H.R. 527, the Regulatory Flexibility Improvements Act of 2011. The legislation improves the regulatory process by strengthening agency analysis of a rule's impact on small businesses.
Small businesses are the backbone of our nation's economy, and their ability to operate efficiently and free of unnecessary regulatory burdens is critical for our country's economic recovery. Research from a 2010 study released by the Small Business Administration (SBA) Office of Advocacy illustrates that the small business community is disproportionately affected by burdensome federal regulations. This legislation addresses that small business challenge directly.
H.R. 527 gives the SBA Office of Advocacy additional authorities and requires the office to establish standards for conducting a "regulatory flexibility analysis" during the rulemaking process. It improves transparency and ensures that agencies thoughtfully consider the impact of regulations on small businesses.
The legislation would also improve the accuracy of benefit-cost analysis by requiring agencies to consider the indirect impact of regulations on small business.
Finally, the legislation's provisions on periodic review of rules are in line with President Obama's
Executive Order 13563, which requires agencies to conduct a retrospective analysis of existing rules to identify and modify rules in need of reform.
The legislation strengthens the regulatory process and builds upon the intent of Congress when the Regulatory Flexibility Act was originally enacted in 1980.
Thank you for your support of small business and we urge you to vote for the Regulatory Flexibility Improvements Act of 2011, H.R. 527.
Thomas E. Bingham, President
Utah Manufacturers Association
The economic picture remains complicated. On one hand, some indicators suggest that we are beginning to rebound from a lackluster second quarter. We have seen a turnaround in durable goods sales, and industrial production has risen somewhat (although there is room for improvement). Retail sales figures also have had weak but positive growth.
One thing to be thankful for is the easing of prices. Both the consumer and producer price indices fell in June, mostly due to lower energy costs. In each case, though, food prices continued to grow, and core inflation has edged higher for each of the past few months. With the rapid run-up in prices over the past year, pricing pressures remain a concern for many businesses.
Against the backdrop of good news and the hope for an economic rebound, we continue to see signs of weakness in the economy. Small businesses remain anxious about their situation, stalling the sector's willingness to hire new workers, purchase new capital equipment, or seek to grow their business. In May, manufacturing separations outpaced hirings for the first time since October, and while this was mainly the result of temporary phenomena, it does complicate the nation's economic recovery. Highlighting this fact is the observation from the New York Federal Reserve Bank’s July survey that manufacturers in the Empire State continue to experience weaknesses.
In that very same survey from the New York Federal Reserve, it is interesting to observe the contrast between the views of the present economic environment and the respondents' expectations for the next six months. While manufacturers in the state are currently reporting a deterioration in output, they are much more optimistic about new orders, shipments and employment for the second half of this year. This is definitely good news and consistent with my and other economists' forecasts.
This week, much of the news will focus on the housing market, which remains depressed. In addition, we will get a glimpse of the manufacturing sector from the Philadelphia Federal Reserve Bank, and the Conference Board will report on its Leading Economic Indicators index.
Chad Moutray
Chief Economist
National Association of Manufacturers
POLL: HIRING EXPECTED TO PICK UP
Today in Manufacturing
Economists increasingly see hiring picking up through the rest of 2011, even as they predict slower overall growth, NABE survey shows ... continue
FITCH EXPECTS MORE CHINA CORPORATE FRAUD PROBES
Today in Manufacturing
Fitch said last week it was reviewing the 35 Chinese companies that it assigns credit ratings to after a spate of allegations of corporate fraud ... continue
ZIONS BANK WASATCH FRONT CONSUMER PRICE INDEX: TRANSPORTATION COSTS DROP SHARPLY AS OIL PRICES FALL
Utah Pulse
In June 2011, on a non-seasonally adjusted basis, the Zions Bank Wasatch Front Consumer Price Index (CPI) decreased 0.2 percent after rising 0.4 percent in May. The national Consumer Price Index, which is a culmination of all prices throughout the U.S., decreased 0.1 percent in the month of June.
{read more}
US UNEMPLOYMENT TO STAY ELEVATED THROUGH 2012: ANALYST
CNBC.com
While most economists expect to see a rebound in the U.S. economy in the second half of the year, the strength is unlikely to seep into the jobs market, according to one analyst.
AP
"This is the worst recovery in employment in post world war two history," David Mann, Head of Americas Global Research at Standard Chartered Bank told CNBC on Friday. "In fact we have not even come close to recovering from the actual losses of jobs that we've seen through recession."
The most recent American payrolls report showed the U.S. economy adding a mere 18,000 jobs in June, following the equally weak 25,000 figure in May; while the unemployment rate edged higher to 9.2 percent.
Mann doesn’t expect the jobless rate to nudge below 9 percent any time soon.
"We think it's going to be very tough indeed, even by the end of 2012, for it to be below 8 percent," he said, citing continued weakness in the small and medium enterprises (SMEs) in the U.S., which account for 82 percent of employment.
"If you don't have the credit being extended to the SME sector, you're not going to get strong growth in that area and you won't get strong employment," Mann said.
The National Federation of Independent Business' optimism index, which tracks the pulse of small American businesses, dipped 0.1 point to 90.8 in June, and forecasted a deterioration of business conditions in the next six months.
Mann says a ‘skills gap,’ where employers are unable to find candidates with the right talent for open positions, is worsening the problem.
“The longer that you're out of a job, the harder it is to get back into it again, the skills that you would have learned on the job you don't learn; the skills you did have, you start to forget about them,” he said. “There are jobs out there, the problem is that it's again skill mismatch as well.”
Entitlement programs, like unemployment benefits, are also to blame, according to Mann, as they are causing a lack of motivation in American job seekers.
"If you know that you're going to have to be finding something because your benefits will run out very quickly, it is an extra incentive to really go out and find the jobs," Mann said.
MANUFACTURING FLAT IN JUNE BECAUSE OF WEAK AUTOS
Today in Manufacturing
The Federal Reserve said U.S. auto factories produced fewer goods in June than the previous month, and overall factory production was flat ... continue
REPORT: MANUFACTURING TECHNOLOGY FALLS IN MAY
Today in Manufacturing
May U.S. manufacturing technology orders was down 2.6 percent from April but up 121.3 percent when compared with the total of $175.46 million reported for May 2010 ... continue
CHINA ALMOST DOUBLES RARE EARTH EXPORT QUOTA
Quick Manufacturing News
Quota for the next six months of the year is up 97.3% from the 7,976 tons set for the same period last year Click to continue
OUT WITH THE OLD, IN WITH THE NEW: ADDRESSING YOUNG WORKERS' TRAINING NEEDS
Quick Manufacturing News
According to a new poll, Generation Y workers, or those ages 18 to 29, are more likely to appreciate shorter training sessions, flexible training options and remote learning enabled by mobile devices. Companies therefore should consider adapting their training programs in order to better engage these young workers. Click to continue
PASSING TRADE AGREEMENTS COULD ADD 250,000 JOBS SAYS INDUSTRY GROUP
Quick Manufacturing News
Business Roundtable says not passing agreements could cost 400,000 jobs Click to continue
EQUIPMENT LEASING SEES ANEMIC GROWTH
Quick Manufacturing News
The Equipment Leasing and Finance Association just released the annual Survey of Equipment Finance Activity showing an overall 3.9% increase in volume in 2010 after a significant 30.3% decline reported in 2009 and a 2.2% decline reported in 2008. Click to continue
MANUFACTURING REMAINS FAIRLY ROBUST SAYS INDUSTRY GROUP
Quick Manufacturing News
Manufacturer's Alliance/MAPI's R&D index reached a record high of 83% in the June survey, a solid increase from 75% in March. Click to continue
ANALYST: CONOCOPHILLIPS SPLIT IS A STRONG MOVE
Quick Manufacturing News
Split allows the company to focus on more profitable exploration business. Don't be surprised if other oil giants follow suit. Click to continue
T- MOBILE V. UTAH STATE TAX COMMISSION- TAXPAYER FAVORABLE DECISION REGARDING THE UTAH TAX COURT AND THE NON-TAXABILITY OF GOODWILL
Mark Buchi – Holland and Hart
The Utah Supreme Court rendered an important decision for Utah’s taxpayers on two distinct fronts. On June 3, a unanimous 5-0 decision authored by Justice Parrish held that accounting goodwill is not subject to Utah’s property tax and, also importantly, that the tax court established by the vote of the people in 1998 is a court where the taxpayers can do legal battle with the government taxing authorities on a level playing field. Thus, in tax court, the party with the best substantive evidence wins the case. The court noted that no deference is to be paid to the property tax division of the tax commission nor the tax commission’s valuations of property in a tax court appeal.
This means that the taxpayers who appeal a decision of the tax commission can expect to have their case heard before an impartial judge who is not connected with any aspect of the tax commission and who will apply the preponderance of the evidence test in weighing the evidence placed before the court. If the taxpayer has the better case they should prevail. If the government has the better case they should win.
Prior to the establishment of the tax court by constitutional amendment, the taxpayers had an uphill fight due to the deference paid to the tax commission’s decisions. Under a prior test of a previous law, if a case was a close call, the tax commission would win.
While the T-Mobile decision was a property tax appeal, the portion of the decision dealing with the tax court should apply to all tax commission assessments including such well known taxes as sales and use and income.
The substantive ruling on the goodwill issue should put to bed a multi-decade battle between many of the counties in Utah and taxpayers who have substantial goodwill to report on their financial statements. Several battles over the years between taxpayers and the counties have resulted in legislation trying to tax or exempt goodwill from ad valorem taxation. The ruling makes it clear that under the Utah Constitution the state may not tax the income earned from intangible property via the income tax and also subject the goodwill and other intangible property to the property tax. The decision validates the current property tax statute that was enacted in 2006 that lists goodwill as exempt intangible property. Regardless of any statute, the T-Mobile Court has made it clear that goodwill is not taxable under the Utah Constitution.
Goodwill has become an increasingly visible asset for companies in light of new accounting rules requiring companies to evaluate the fair value of their assets and segregate the value of the tangible assets, the separately identified intangible assets like patents and trademarks and accounting goodwill. Accounting goodwill is often produced when a company pays a premium to acquire another company. The Utah court also pronounced that typical goodwill such as business reputation and patronage should be viewed as interchangeable with accounting goodwill for Utah property tax purposes.
Another important position of the court in this decision centers on multi-county and multi-state taxpayers whose property is required to be assessed by the unitary method. The state and counties have often argued for the position that for such properties, the income stream should be capitalized and the synergy in value of the business is taxable as tangible property. The court reinforced earlier decisions that held that his enhanced value should be taxed. The counties have argued that goodwill is such a taxable asset. The court disagreed and rather agreed with the taxpayer that synergy values are already reflected in the tangible property values and are not reflected in the accounting goodwill.
This decision will be an important part of the business fabric of Utah, reaffirming that Utah is a favorable place to do business.
This case was tried by two Utah lawyers who have actively assisted the manufacturing association with tax issues over many years. Mark Buchi, former Chairman of the Utah State Tax Commission and now a partner with the law firm of Holland & Hart LLP and Steve Young, a partner at the same firm tried this case in the tax court and briefed and argued it before the Utah Supreme Court.
MADE IN UTAH
Manufacturers Returning Production to Utah Roots
Tom Haraldsen
Ray Malley remembers something his late father used to say to him whenever the elder Malley made a purchase.
“He’d say, ‘if it’s made in the USA, it’s good for the USA. Closer to home is better,’” Malley recalls. Now, the advice that the former Californian received from his father may be in step with that of several local manufacturers who’ve started a new trend—bringing their manufacturing back to the state from abroad.
“Not only have I been hearing that it’s going to happen, it’s a fact,” says Lew Cramer, president and CEO of the World Trade Center Utah. “Manufacturers in this state, and in several other states, are asking themselves what makes the most sense to do. They no longer say, ‘Hey, I’m going offshore no matter what,’ because that is short-sighted. I’ve talked to several local manufacturers who are no longer interested in going to China for their products, and that’s a great thing for Utah.”
Quality Counts
A number of Utah manufacturers discussed the subject at a Utah Business roundtable earlier this year (see our April issue). Companies such as Orem-based Mity-Lite and Bountiful-based Orbit Irrigation have expanded their local production efforts and have been importing less and less from Asia. Other Utah companies such as Little Giant Ladders and BlendTec are doing the same.
There are several reasons for the shift in strategy—customer loyalty being among them.
“We have noticed in the stores and through visits with customers that pro-ducts that say ‘Made in the USA’ sell better here, as well as in foreign countries,” says K.C. Ericksen, president and CEO of Orbit. “We’ve found ways to make the move back to local manufacturing more strategic, and it’s helped us on many fronts.”
Cramer, who visited China as part of a state-sponsored trade mission trip in April, observes that “thousands of [Chinese] companies have gone out of business” over the past couple of years, due largely to the fact that manufacturers are choosing to bring their production back to their native countries.
“There are many advantages for doing that,” Cramer says. “Among them are more quality control, employee morale and motivation, and reducing costs by incorporating more and more automation into the process. Price alone [by importing products from China] is becoming less of an incentive for companies who want to keep production at home.”
Mity-Lite is a great example.
“Our decisions [on importing] have gotten clearer over the past few years,” Mity-Lite COO Brian Bowers says. “There are some products that we’ve brought back in-house, the most successful ones like our Mesh-One and Flex-One products. We had intended to outsource them, but our operations team asked if they could bid, on behalf of our employees, against foreign pricing. We concluded we could probably do it less expensively here than overseas.”
The highly popular Flex-One folding chair is the company’s first entry into retail, and it’s now selling in more than 400 Sam’s Club stores nationwide. The chair is made entirely at the Orem plant. What made in-house production preferable to importing the chair?
“One reason is that shipping costs are rising,” Bowers says. “We’ve seen our [shipping] container cost go up by 33 percent in the last two years from China. Then there’s the unfavorable currency issue in China, where it’s changed negatively by 25 percent for them, which has made pricing difficult for them to get hold of. We used to have all of our table legs made in China, but by making some adjustments, we started bringing the manufacturing of those legs back to the U.S. two years ago. Now, 95 percent of our legs are made here.”
Lag time is another issue, as the old proverbial phrase “it’s on a slow boat from China” is more reality than metaphor.
“Almost all of our standard products can ship within two weeks when we make them here, and that’s outstanding for our industry,” Bowers says. “You can warehouse a lot of product you get from overseas, but that costs as well. And because so many of our products are custom made, we’d have to hold lots of different SKUs.”
Chinese manufacturers won’t start working on a product until it’s ordered, and shipping takes at least four weeks. So it might be seven to eight weeks from start to finish to get product from overseas. “It’s painful,” he says.
The Home Team
Bowers and Ericksen agree that as more and more product is made at their plants, employee morale and motivation has improved.
“I think one upside is that our people feel more secure,” Ericksen says. “They know that as we succeed, they succeed as well.”
“Certainly, our team has really jumped in,” Bowers adds. “They know that they are competing not just in Utah or the U.S., but globally. We’ve helped our employees realize that as we continue to improve and produce here, it’s better for everyone.”
Ericksen does have one concern: the need for a larger, technically trained workforce for the automated processes many companies use.
“We don’t have enough technical people in the state to support what we’re building here—people who are technicians in injection molding and extruding,” he says. “We end up training a lot of people, but Utah has many high-tech medical companies who need people with those same skills. And so we’re in competition for workers with those skills. I’d like to see more money used towards technical training.”
If the trend of bringing manufacturing back home to Utah continues, it’s a need education officials should happily address.
ARE MILLENNIALS LOOKING FOR THE EXIT?
Quick Manufacturing News
Companies that are looking for ways to attract, retain and motivate their younger workers need to make sure they can keep these individuals on staff once the economic recovery is over. Click to continue
WHY YOUR EMPLOYEES SHOULD HAVE 'SKIN IN THE GAME'
Quick Manufacturing News
Offering equity in the company is the best way to motivate your workers, OfficeMax co-founder says. Click to continue
AMID SLOWING U.S. DEBT DEMAND, CHINA RAISES HOLDINGS
Quick Manufacturing News
China, as the biggest investor in the United States, is being closely watched for shifts in its demand for U.S. debt. Click to continue
SALT LAKE CITY NAMED ONE OF 15 GLOBAL 'BEST NEW CITIES FOR BUSINESS'
EDCUtah
When the editors at Fortune Magazine set out to identify the "next business hot spots" around the globe, they couldn't pass up Salt Lake City. In fact, Utah's capital city is one of only two U.S. cities to make Fortune's list of the "15 Best New Cities for Business."
"This is incredible news for the state," says EDCUtah President & CEO Jeff Edwards. "Such a ranking confirms all of the other great accolades Utah has received and draws attention to our unique public-private partnerships -- the willingness of our elected officials to work with the business community -- that attract and help businesses flourish here."
Further, Edwards says EDCUtah was pleased to work in partnership with the Salt Lake Chamber and World Trade Center Utah in supplying data for the Chamber's submission to Fortune's editors.
The establish its list, Fortune's editors "looked at economic data, asked business leaders where they planned to open new offices and factories, and called on Booz & Company consultants to suss out emerging innovation hubs, especially in Asia." Here are the cities that made the cut, listed alphabetically:
Ahmedabad (India)
Austin (USA)
Bogota (Colombia)
Chengdu (China)
Chongqing (China)
Doha (Qatar)
Gurgaon (India)
Lagos (Nigeria)
Melbourne (Australia)
Salt Lake City (USA)
San Jose (Costa Rica)
Santiago (Chile)
Stockholm (Sweden)
Vancouver (Canada)
Warsaw (Poland)
Fortune's web site contains a map that includes profiles of each city with fun facts, major companies, key universities and population. Regarding Salt Lake City the magazine says, "Move over, Stanford: The University of Utah claims to lead the nation's universities in creating successful startups--and the Brookings Institution says the city's workforce is the nation's most productive. More reasons businesses like Salt Lake: Inexpensive utilities and state property taxes, and corporate taxes that are the ninth-lowest in the U.S." How could Salt Lake City make such an impressive list? Here is a short list of good reasons:
Demographics
Salt Lake City is becoming increasingly diverse, the end result being a young, rapidly growing, diversifying and healthy population that attracts new companies to our state. In fact, Utah's workforce was the number one reason ITT choose to expand here with 2,700 jobs, and our workforce continues to attract companies like EMC, IMFlash, Adobe and Procter & Gamble.
Further, Utah has the highest proportion of second language speakers in USA (33 percent of working Utahns speak more than one language fluently). Hence, our talented workforce, with its skills in foreign languages and cultures, is one of the reasons global companies such as Goldman Sachs, American Express, and numerous other financial entities have major operations in Utah.
Utah arguably has the most unique demographic profile in the nation: the highest fertility rate, the youngest population and the largest family sizes in the country. Further, Utah's population is among the nation's healthiest, as measured by life expectancy, and typically ranks among the top three states in population growth. Meanwhile, the state's quality of health care per dollar is among the highest in the nation.
Economic Diversity and Stability
Salt Lake City (and the state) enjoys economic diversity that is a surprise to most outsiders. In fact, the state's economy offers a little bit of everything -- defense, agriculture, tourism, manufacturing, transportation, high tech, financial services and more. Moody's ranks Utah's economic diversity sixth in the nation. Utah enjoys economic stability, even in its rapid growth. The state is an "island of stability" with a business-friendly tax and regulatory environment. CEO Magazine says Utah is the 9th best state in which to do business, while the Tax Foundation says Utah has the sixth best corporate income tax climate. Utah also has the 13th best individual income tax rank.
Utah enjoys the 4th lowest energy costs in the U.S. (35 percent below the national average) and has the best economic climate, according to Pollina Corporate. Moody's projects the Utah economy to grow four percent annually over the next five years. Unemployment is forecasted to average 5.5 percent in 2012, while household incomes are growing five percent per year -- the fastest rate in the U.S.
Fiscal Fidelity
Utah sets the standard among states for fiscal responsibility. Governor Gary Herbert and the State Legislature have managed the affairs of the state so responsibly that even after the longest, deepest and broadest recession in over seven years, Utah still has money in the bank -- and managed through the Great Recession without a general tax increase! The state's rainy day fund balance is over $200 million currently. Utah also has a constitutional balance budget requirement, a line-item veto, a constitutional bond limitation, statutory appropriations limitation, and a mandatory fiscal note process for all legislation. Such fiscal prudence demonstrates to business that Utah is a safe investment and a place where the public and private sector work well together.
Vision
It can be said with certainty that Salt Lake City "knows what it wants to be when it grows up." A 40-year vision called Downtown Rising (DowntownRising.com) demonstrates the spirited commitment and extraordinary investment being made in the future of Salt Lake City. The vision is to be a global city, a city of learning, a green city, a center for arts and culture, and a welcoming city. Further, eight signature projects have been identified for today's leaders to develop and leave for the next generation of city builders. These include regional rail, downtown living, a new Broadway-style theater, a public market, a network of trails, a flagship sports and fitness center, a World Trade Center and a university/college town ambiance. The University of Utah's recent entrance into the PAC 12 is a part of the realization of this vision. So is the development of 70 miles of rail in seven years and the opening of the nation's largest downtown mixed use development, City Creek Center, which is slated to open on March 22, 2012. Salt Lake City is undisputedly on the rise.
Morever, Salt Lake City is an exceptionally clean, safe, friendly, well-organized, well-running cosmopolitan city with a startlingly open approach to culture, restaurants, entrepreneurship, educational attainment, and international opportunities. That coupled with incredibly gorgeous natural beauty (mountains, snow, hiking, biking, etc.) make Salt Lake City the complete package!
A Global City
Salt Lake City is the hub of global activity in Utah, while Utah is the ONLY state in nation that doubled its exports the past five years. The neighboring states of Arizona, Colorado and New Mexico suffered a drop in their exports over the same five year period. Further, Utah was the only state in nation to enjoy expansion in its exports from 2008 to 2009, according to the U.S. Department of Commerce. This is critical because exports directly create higher paying jobs.
Utah's export growth to date is already 20 percent ahead of last year's record pace. Also, a major international bank reports that Salt Lake City consistently ranks in the top five of its foreign exchange markets in the USA.
Salt Lake City is also a key transportation and distribution hub for businesses activity from Canada to Mexico and the entire Western U.S. As the "Crossroads of the West," major highway systems and the rail lines of three western ports converge in Salt Lake City.
UMA JOINS OTHER ASSOCIATIONS IN SUPPORT OF REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011
UMA added its name to the following letter to the U.S. House of Representatives in support of making improvements in the flexibility of regulations for small business.
To Members of the U.S. House of Representatives:
We are writing to express our support for H.R. 527, the Regulatory Flexibility Improvements Act of 2011. The legislation improves the regulatory process by strengthening agency analysis of a rule's impact on small businesses.
Small businesses are the backbone of our nation's economy, and their ability to operate efficiently and free of unnecessary regulatory burdens is critical for our country's economic recovery. Research from a 2010 study released by the Small Business Administration (SBA) Office of Advocacy illustrates that the small business community is disproportionately affected by burdensome federal regulations. This legislation addresses that small business challenge directly.
H.R. 527 gives the SBA Office of Advocacy additional authorities and requires the office to establish standards for conducting a "regulatory flexibility analysis" during the rulemaking process. It improves transparency and ensures that agencies thoughtfully consider the impact of regulations on small businesses.
The legislation would also improve the accuracy of benefit-cost analysis by requiring agencies to consider the indirect impact of regulations on small business.
Finally, the legislation's provisions on periodic review of rules are in line with President Obama's
Executive Order 13563, which requires agencies to conduct a retrospective analysis of existing rules to identify and modify rules in need of reform.
The legislation strengthens the regulatory process and builds upon the intent of Congress when the Regulatory Flexibility Act was originally enacted in 1980.
Thank you for your support of small business and we urge you to vote for the Regulatory Flexibility Improvements Act of 2011, H.R. 527.
Thomas E. Bingham, President
Utah Manufacturers Association
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