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Factories rev up, but hiring doesn't

A healthy pickup in production of manufactured goods last month added to the gathering momentum for the U.S. economy. So far, that growth has done little to help the job prospects for the millions of factory workers still sidelined by the 2007 recession.

U.S. factories continued to ramp up production of manufactured goods in December as stronger demand for business equipment and vehicles followed other signs that the economic recovery gained steam in the last three months of 2011. The Federal Reserve said Wednesday that its widely followed manufacturing index rose by 0.9 percent in December, the biggest gain in a year. The overall output of the nation's factories, mines and utilities expanded by 0.4 percent in December; utilities cut back output as relatively warm weather held back demand for energy in much of the country.

The breadth of the gain was especially encouraging. Much of the boost in manufacturing came from orders for business equipment from small and medium-sized companies expand their operations to keep up with demand from their customers.

Consumers did their part too. U.S. automakers posted their best sales gains for the year in November and December: GM's December sales rose 5 percent, Ford's climbed 10 percent and Chrysler's surged 37 percent.

Car dealers say that trend is expected to continue as businesses and consumers replace worn-out cars and trucks they’ve been patching together since the recession. The average age of a vehicle on U.S. highways has hit a record 10.8 years; eventually those cars will need to be replaced. The National Automotive Dealers Association is forecasting sales of cars and light trucks will hit nearly 14 million this year, up from 12. 7 million in 2011 and 10.4 million in 2009 as the recession wound down.

Since then businesses have been boosting investment in new plants and equipment, partly because of tax breaks that allowed them to write off those costs more quickly. They've also moved to take advantage of record low interest rates to finance those purchases. Major U.S. banks reported a healthy pickup in demand for loans in the final quarter of 2011.

It remains to be seen whether U.S. manufacturers can keep the momentum going amid signs that the global economy may be headed for a slowdown. Much of the fresh demand for U.S. products is coming from overseas markets, where growth rates are higher than the roughly 2.5 percent domestic growth pace. While other recent data seem to show the pace of manufacturing holding up in the first weeks of 2012, most forecasters expect to see that slowing later this year.

“The concern is that with China’s latest GDP report showing slower growth and the eurozone slipping back into recession, the U.S. consumer could be the ‘last man standing’ for U.S. manufacturing this year," said Paul Edelstein, director of financial economics at IHS Global Insight. "This is not a bright prospect.”

Even if the pace of growth holds up, job prospects for factory workers haven’t kept pace with the pickup in factory output. Manufacturing output, as measured by the Fed’s industrial production index, has rebounded 14 percent since it bottomed at the end of recession. But employment levels for factory workers are up only 3 percent from the post-recession bottom.

Part of the reason is that big investment in new machines and computers has allowed factory owners to get more output from the same number of workers. But the workers getting rehired aren’t necessarily the same ones who were laid off during the recession. Employers who are investing in high-tech manufacturing equipment need more highly skilled workers to run those machines, but they’re also paying higher wages. Since the recession ended, the average wage for factory workers has risen by about 4 percent to $23.93 an hour.

Even as some 2.4 million factory workers remain sidelined by the recession, many employers complain they can’t find enough skilled workers to fill the new jobs they’re creating.

That’s forced many U.S. employers to shift high-tech factory jobs overseas. During the past decade, U.S companies moved more than a quarter of their high-tech manufacturing jobs overseas, according to a report this week from the National Science Board. The report found that U.S. high-tech factory jobs fell by 687,000, or 28 percent, between 2000 and 2010.

The shift followed a major investment in higher education in China and other Asian countries working to build on their low-cost, low-wage manufacturing bases.

Sharing why he thinks this year will be a good year for the economy, with James Stewart, The New York Times.

"Over time, global science and technology capabilities have grown nowhere more so than Asia," according to the NSB report. "In most broad aspects of science and technology activities, the United States continues to maintain a position of leadership. But it has experienced a gradual erosion of its position in many specific areas."

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