With the Dow Jones average jumping back and forth, and unemployment staying high, it's natural for plastics executives to be concerned. Wilbur Ross, the owner/founder of one of the industry's biggest companies, International Automotive Components, shared his views on stock prices and the economy in an interview yesterday with National Public Radio. Ross sees no recession ahead, but instead a stumbling economy that will grow very slowly. He also talks about why the unemployment rate will remain high, essentially because to compete manufacturers are investing in automation -- sound familiar? Host Steve Inskeep asks Ross: "What do you think, as someone [who] observes and tries to understand the markets in the broader economy, is the reason that the economy would just be, as you put it, stumbling along and not really taking off?" Ross replies:
Well, I think there's several factors. No. 1 is we believe that unemployment is going to remain high. Virtually all companies we know of have learned to live with fewer employees per incremental dollar of sales than they ever had before. So we believe that part of the high unemployment is due, not just cyclical factors, but to structural change in the economy. And that's why corporate America is in much better shape than Mr. and Mrs. America. ... The substitution of capital for labor has been continuing. I think that people have also restructured the way that they do business, all with an eye toward reducing labor costs. And you've seen those big gains in productivity. June was the first month where productivity didn't really go up, actually it declined a little bit. And that's the first month in many, many months where there hasn't been a big productivity gain. So I think that's a problem and it's going to be a continuing problem, partly because the American educational system is not producing people with the qualifications to do the jobs in the new economy.It's an interesting perspective. When I watch the Sunday morning news-interview programs, I keep hearing commentators blame the lack of better employment figures on businesses that are sitting on cash rather than hiring additional workers. But in the manufacturing sector, hiring is only going to pick up when companies need additional workers to keep up with demand. The recession delivered a punch in the gut to manufacturers that weren't pursuing a lean strategy. It will take a while before they forget that lesson.