October 31, 2011

October 31, 2011


Economy-watchers had many reasons for optimism last week. Global equities rose significantly after European leaders announced a new agreement for dealing with their debt crisis. Time will show whether or not this plan is enough to forestall a larger financial crisis. Implementation will be difficult, and debt-to-GDP ratios remain unbearably high for many of these nations. At least for now, markets have been encouraged by the overall agreement, despite the obvious challenges that lie ahead.

Meanwhile, the U.S. economy is showing signs of renewed strength. Real GDP grew 2.5 percent in the third quarter, which was in line with overall expectations and a significant improvement from the first half of the year. Personal spending, business investment and exports helped to lift these numbers, with consumption alone contributing 1.7 percent of the 2.5 percent growth in GDP. Durable goods spending rebounded from its tough second-quarter by contributing another 0.3 percentage points to the final number.

Consumers, though, are increasing their spending at a time when their incomes are not keeping up the same pace. Personal income rose just 0.1 percent in September, but personal spending grew by 0.6 percent. As a result, Americans have had to dip into their savings to make many of their purchases, with the U.S. savings rate falling to 3.6 percent. This could limit consumption growth in the months ahead unless income growth picks up.

It is notable that increased spending is taking place at a time when consumers remain so pessimistic. Two sentiment surveys last week focused on this: one from the Conference Board and another from the University of Michigan and Thomson Reuters. While they tended to move in opposite directions, both of them noted concerns about the larger economy relative to a few months ago. The Conference Board one fell to a level not seen since the recession, with pocketbook issues of income and employment being the primary drivers.

For manufacturers, several economic indicators observed a pickup in production activity. While the overall durable goods orders for September fell by 0.8 percent, this was largely due to volatility in the transportation sector. Outside of transportation, there was a relatively broad-based increase in new orders that signifies a rebound from the supply-chain and other challenges since the spring months. Likewise, the Kansas City Federal Reserve’s survey observed a modest pickup in manufacturing activity. East coast manufacturers, such as the ones who responded to the Richmond Fed’s survey, bucked this trend, observing continued contractions in new orders, shipments and employment. Yet, these same individuals paint a more optimistic assessment of the next six months – a positive sign.

This week, we will get an even better sense of whether that optimism is well-placed. Tomorrow, the Institute for Supply Management will release its latest Purchasing Managers Index, which should show some continued improvement in production activity, and the Federal Reserve will announce whether or not it will attempt new stimulative measures on Wednesday. We will also get new employment numbers from the Bureau of Labor Statistics on Friday. In addition, there will be new data on regional manufacturing from Chicago and Dallas, construction, factory orders and productivity. .

Chad Moutray
Chief Economist
National Association of Manufacturers

REPORT: FOOD INDUSTRY SELF-REGULATES ON SAFETY

Today in Manufacturing
Thousands of ingredients that go into food have been classified as safe by private industry alone, according to the Pew Health Group ... continue

A RECESSION IS A GREAT TIME TO LAUNCH A NEW PRODUCT
Today in Manufacturing
A recession has a funny way of showing people that some things are broken, and sends some looking for
solutions ... continue

ARE WE FREE TRADING AWAY OUR FUTURE?
Today in Manufacturing
We have slipped from being the number one exporting nation in the world to number three, and have been running trade deficits for many years ... continue

FEATURE STORY: CUSTOMIZED TRAINING KEEPS UTAH'S WORKFORCE UP TO SPEED WITH BUSINESS NEEDS, AIDS ECONOMIC GROWTH
EDCUtah
During fiscal year 2011 more than 16,000 employees from 1,173 Utah businesses received specialized workforce training through an increasingly popular program called "Custom Fit," which leverages state funds to encourage business expansion.

Such training has become an essential tool for Utah businesses to find and retain the talent they need to sustain their growth.

The Utah College of Applied Technology (UCAT) is the primary source of Custom Fit Training. It administers the program through eight UCAT campuses, Snow College and Utah State University Eastern formerly the College of Eastern Utah). Together, the 10 providers served 1,044 businesses during FY 2011, according to a UCAT report released this week. Salt Lake Community College (SLCC) also administers Custom Fit Training funds and reports that during FY 2011 it served 129 businesses with Custom Fit Training.

Investing in Workforce Development
Recognizing that workforce development is essential to maintain and grow Utah's economy, the state legislature created the visionary Custom Fit Training program 25 years ago. Today Custom Fit is a mainstay in helping Utah businesses remain relevant and competitive in the global marketplace. Further, because of the regional scope of the applied technology colleges and coverage by Snow College, USU Eastern and SLCC, businesses across the entire state have the opportunity to engage their workers in Custom Fit Training.

Melanie Hall, marketing manager for SLCC's School of Professional and Economic Development, and Shannon Strickland, manager of Custom Fit Training and Short Term Intensive Training at SLCC, call Custom Fit "Utah's best kept secret" because so many businesses are surprised when they learn that it is available. Truth be told, the secret is out. Custom Fit Training is so popular among Utah businesses there is never enough money in the program to meet the growing demand for training. In FY 2011 UCAT received a little more than $2.8 million in Custom Fit Training funds, which it divided among the eight applied technology colleges, Snow College and USU Eastern. The 10 schools then raised an additional $1.6 million in company contributions, for a total of $4.4 million expended on Custom Fit Training. (Salt Lake Community College also received Custom Fit Training funds, which it administered separately from the funds appropriated to UCAT.) Generally, a business seeking Custom Fit Training is expected to pay 40% to 50% of the cost, while the remainder is paid through the Custom Fit funds allocated to the schools.

Because of the increasing demand, UCAT President Robert Brems says he will petition the 2012 legislature to increase the amount of money it appropriates to the Custom Fit program. "The demand has been so high, many of our institutions have already committed their entire allotment of FY 2012 Custom Fit money and we are only about four months into the year," he explains. Demand is also skyrocketing for Custom Fit training through SLCC. Strickland says SLCC assisted 66 companies and over 800 students in the first quarter of this fiscal year.

Customized Training
Brems says the Custom Fit program is unique because the schools are able to customize the training they provide to meet the specific needs of the businesses they serve. Generally, the first step for the school is to complete a needs analysis, through which it identifies what training the business needs and how to coordinate the training effort.

"This is going to the employer and figuring out exactly what training the employer's workforce needs on a short term basis. Custom Fit is especially beneficial during the down economy, when funds are tight and training dollars might be allocated elsewhere by a business," he adds.

SLCC recently used Custom Fit Training to customize an existing electronics technician certification program in the School of Applied Technology to meet the workforce needs of L-3 Communications West. SLCC and L-3 are working together to create a "University of Manufacturing" that could one day turn into a standalone program offered by the school. SLCC has assisted many other Utah businesses with their workforce training needs as well.

Training in Action
In Ogden, Alanna Posell, trainer for Cornerstone Nutritional Labs, says Custom Fit training through the Ogden-Weber Applied Technology College enabled the company to broaden the type of training courses it is able to provide. "Using the Custom Fit program saves Cornerstone money, which allows us to provide more training to our employees," she says.

Meanwhile, the Dixie Applied Technology College in St. George was able to assist Blue Bunny Ice Cream with a Custom Fit program wherein 58 employees received a combined 1,063 hours of lean manufacturing training. Custom Fit funds paid for $28,759 of the training, while Blue Bunny paid $14,380.

In Tremonton, the Bridgerland Applied Technology College used Custom Fit funds to tailor the ATC's Fire and Rescue Services Program and train more than 40 Procter & Gamble employees in fire safety skills and incident command techniques. The employees received a combined 1,352 hours of training at a cost of $17,713. Procter & Gamble paid $6,640 for that training, while Custom Fit funds paid $11,073.

The requirements to qualify for Custom Fit Training are not stringent. Generally, the business must be a for-profit company and the workers to receive training must be employees of the company. Further, the business must be prepared to pay between 40%-50% of the training cost. The exact cost and requirements of the training program are usually negotiated between the school providing the training and the business.

EDCUtah President & CEO Jeff Edwards notes that Custom Fit training is not only important for keeping the state's workforce skills up to speed with the hiring needs of local businesses, but also for recruiting new businesses to the state. "Having higher education institutions that are nimble enough to quickly customize training for the needs of incoming businesses is a major factor in our business recruitment success," he explains.

MEET OCCUPY WALL STREET'S ANARCHIST-IN-CHIEF
Bloomberrg/Business Week
Occupy Wall Street's s anarchic philosophy opposes hierarchical leadership, but David Graeber is arguably the chief the group claims not to have. Graeber, a former Yale professor, specializes in facilitating "general assemblies" -- essentially management meetings at which thousands of protesters seek a consensus on their goals and strategies. "If you’re really dedicated to this stuff, things can happen very quickly," Graeber says. Bloomberg Businessweek

CONSUMER SPENDING JUMPS IN SEPTEMBER
Today in Manufacturing
Americans spent in September at three times the pace of the previous month, even though their incomes barely budged ... continue

EQUIPMENT FINANCING MAINTAINS GROWTH
Quick Manufacturing News
Overall new business volume for the equipment finance sector in September was $7.1 billion, up 25% from volume of $5.7 billion in the same period in 2010, according to the Equipment Leasing and Finance Association. Click to continue

STUDY: JAPAN RADIATION HIGHER THAN ESTIMATED
Today in Manufacturing
Fukushima nuclear disaster released twice as much of a radioactive substance into the atmosphere as Japanese authorities estimated ... continue

STRONG PACE FOR UTAH JOBS
Utah Business
Utah’s current job creation pace ranks among the nation’s most impressive, according to the Autumn 2011 issue of Zions Bank’s Insight—Economic News of Utah and the Nation. The Utah economy added nearly 35,000 net additional jobs during the most recent 12-month period, a growth pace of 2.9 percent.
View Full Article

THIRD QUARTER HOME SALES AT HIGH
Utah Business
Sales of previously-owned single-family homes in Salt Lake County in the third quarter reached its highest point in four years, according to the Salt Lake Board of REALTORS. The number of single-family homes sold in Salt Lake County in the July-August-September period totaled 2,603 sales, the highest number of homes sold in a third quarter since 2007, when 2,693 homes were sold. The most recent quarter showed a 33 percent increase in home sales compared to 1,953 sales in last year’s third quarter.
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INDUSTRIAL MARKET FLATTENING, OFFICE VACANCY DECREASING
Utah Business
New reports from Commerce Real Estate Solutions confirm some of the reasons why Utah has fared better than the rest of the nation in the last year. Many indicators within the four real estate sectors—office, industrial, retail and investment—are positive signs the recovery is strengthening in the Greater Salt Lake Area. Over the past year, Utah has added over 30,000 jobs or approximately a 2.
View Full Article

MANAGING SAFETY: THREE STEPS TO BUILD CHARACTER IN SAFETY
Quick Manufacturing News
You can measure safety character by observing how people make decisions. Every decision to take unnecessary risk is preceded by a series of ill-advised choices. Click to continue

NAM’S LAW SUIT AGAINST NLRB
The NAM’s law suit challenging the National Labor Relations Board’s employee-rights posting requirement continues to gain momentum. This month, the NLRB agreed to postpone the effective date of the regulation by 2½ months to January 31, 2012. This will give the judge additional time to consider the merits of our suit and prevent unnecessary compliance expenses and concerns. Since our suit was filed, seven other organizations have joined or filed similar suits.

TAXATION AND THE COURTS
Manufacturers in the Court - NAM
NAM supports eligibility of supplies for R&D tax credit. A federal tax court judge has thrown a monkey wrench into determining what costs may be included as "qualified research expenses" eligible for the research and development (R&D) tax credit when companies undertake manufacturing process improvements. His 2009 decision is now on appeal to the Second Circuit, and the NAM filed an amicus brief underscoring why supply costs are legitimate research expenses for process improvements. Whether such supplies wind up as salable products is not relevant to their eligibility for tax-favored treatment, as they are critical to the process and denying them would discourage experimentation and encourage economic waste. Union Carbide Corp. v. Commissioner (2d Cir.).

NAM OPPOSES PROPOSED OSHA RULE FOR INJURIES, AMPUTATIONS.
The Hill
"Trade groups are urging the Occupational Safety and Health Administration (OSHA) to abandon a proposed regulation that would require employers to report workplace injuries within eight hours and amputations within 24." It "would require employers "to report to OSHA, within eight hours, all work-related fatalities and all work-related in-patient hospitalizations; and within 24 hours, all work-related amputations," and would update which employers were exempt from this requirement," OSHA said in its proposal. The "National Association of Manufacturers and other employer associations say the requirement would be a nuisance and a job-killer."